Ruffer Investment Company

RUFFER INVESTMENT COMPANY LIMITED

(a closed-ended investment company incorporated in Guernsey with registration number 41996)

LEI 21380068AHZKY7MKNO47

Attached is a link to the Monthly Investment Report for March 2021.

http://www.rns-pdf.londonstockexchange.com/rns/9709U_1-2021-4-9.pdf 

During March, the net asset value of the Company rose by 3.0% after allowing for the dividend paid during the month. This compares with a rise of 4.0% in the FTSE All-Share index. Index-linked gilts and cyclical equities were the main contributors to performance while options, gold and US index-linked bonds were a small drag on returns.

Closing the books on the first quarter, we are pleased to be up 7.3%. Global equities also had a good start - the FTSE All-World was up 4.0% as investors started to visualise what a recovery will feel like.

Meanwhile, most multi-asset strategies and conventional portfolios were either side of breakeven. Conventional portfolios have become, by design and by default (via benchmarking), wired to the assets which performed well in the last market regime. That was a period of low economic growth and falling inflation. In a nutshell, this equated to prioritising conventional bonds over inflation-linked bonds, a preference for growth over value and for technology over everything. The problem is that in the new regime these might all be the wrong trades.

Today, we expect an economic boom in the latter half of the year and hopefully into 2022. What is the recipe? Take one part pent up animal spirits, mix with accumulated lockdown savings, pour on lashings of stimulus - serve in a supply constrained glass. Even central bankers are in party mood - they have said they will not take away the punchbowl until we have overshot policy objectives.

In this world, there will be ample opportunity for businesses that have survived covid to grow sales and earnings - so the premium put on growth stocks will no longer be valid. Expect cyclical and value stocks to perform best. In the bond market, the US ten year yield has more than tripled from the August lows and sits at 1.7%, but it is still lower than where it ended 2019. This is where the real conundrum lies. The Barclays Long Treasury Index is down over 20% since August, its worst fall in 40 years, reminding everyone there is still risk in this supposedly risk-free asset. Rising yields are also starting to cause stresses elsewhere. The tide going out revealed Archegos and Greensill to be swimming naked and gold is down 15% from the autumn peak where we were taking profits.

Our Chief Investment Officer, Henry Maxey, expands upon the idea that traditional portfolios are going to get chomped by 'Jurassic risk' in our latest Ruffer Review. Of course, it is possible this is just a cyclical upswing before disinflationary forces reassert themselves, but we think the game has changed.

For the new regime, investors need to be more creative in their diversification and protections. Government and corporate bonds are a mathematically bounded asset class offering low returns and limited protective qualities. We continue to see a competitive advantage in the expertise we have accumulated in unconventional protections and also think index-linked bonds will become a key asset class in the future.

As for inflation, as George Soros said "I'm not predicting it, I'm observing it." Houses, used cars, microchips, the cost of shipping - it's happening right now. We have our protections and a game plan in place.

Enquiries:

Praxis Fund Services Limited

Gail Adams

DDI: +44(0)1481 755584

Email: [email protected]