Monthly Investment Report - November 2019
RUFFER INVESTMENT COMPANY LIMITED
(a closed-ended investment company incorporated in Guernsey with registration number 41996)
Attached is a link to the Investment Monthly Report for November 2019.
During November, the net asset value of the Company rose by 0.1%. This compares with a rise of 2.2% in the FTSE All-Share index.
At Ruffer, we recently marked our 25th anniversary of managing investments for our clients. Over the quarter century since we were founded, we have broadly succeeded in our twin aims of avoiding losing money in the big market collapses (notably 2000-2003 and 2008) and delivering a decent return over and above that of cash (currently compounding at 8% pa over 25 years). This outcome has been achieved by steadfastly adhering to our investment philosophy of always holding a combination of both 'fear' and 'greed' assets in our portfolios.
The greed assets are relatively self-explanatory. They consist largely of equities, though we often shun the more expensive and crowded areas of the stock market that turn out to be the cause of maximum damage when markets reverse.
The fear side of the equation is less straightforward and of course changes with each market cycle. In essence we seek to invest in those assets that investors will panic into when times get truly difficult. Such assets will normally be dull, or even costly, in the good times, but have successfully delivered for us in each major market downturn. In 1999-2000 it was long-dated conventional bonds (and no tech stocks) that protected our investors, whilst in 2008 it was Swiss government bonds and the yen. Today it is index-linked bonds, gold and credit protections that we believe will do the job when markets break.
Such an approach can be harder to execute in the rare periods when both greed and fear assets rise in tandem, as has occurred this year. 2019 has seen strong returns not only from equities, but also gold and long duration inflation-linked bonds. Such a situation cannot last, you cannot both have your cake and eat it, despite the blandishments of politicians, and accordingly we have adjusted our portfolios to reflect this. We have taken some profits in gold mining stocks, and similarly, after making significant gains from index-linked gilts earlier this year, we took some profits here too, thereby reducing the overall duration of our portfolios. Supporting this move is an appreciation that a Conservative victory in the coming election, combined with some relief at avoiding a 'no deal' Brexit, plus a likely fiscal boost to the domestic economy, could see both sterling and gilt yields rise, at least temporarily.
Following these tactical adjustments, we remain confident that we still hold sufficient protection to preserve investors' capital should markets fall precipitously, or indeed should current polls prove misleading and a very different government is elected. In the meantime, by holding close to 40% in equities (often those in more economically sensitive areas) we should be able to make money if markets continue to gorge on 'cake'.
Praxis Fund Services Limited
DDI: +44(0)1481 755584
Email: [email protected]
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