Ruffer Investment Company's defensive posture hurts performance as NAV slumps 1.7%

investmentweek.co.uk:

Duncan MacInnes (pictured) runs the Ruffer Investment Company portfolio alongside Jasmine Yeo.

The net asset value (NAV) total return for the year was -1.7%, while the share total return was -7.2% as the trust swung from a peak premium of 3.7% in September 2022 to a discount of 4.6% last month.

«There is no hiding from the disappointing numbers delivered during this period,» wrote the managers Duncan MacInnes and Jasmine Yeo. «We share in the pain of our shareholders in having lost money over the past year and acknowledge this represents a failure of our objectives.»

In the trust's period-end review published today (17 July), MacInnes and Yeo said they had «miscalibrated» the portfolio's protection and growth scales «for much of the latter part of the reporting period». 

Ruffer hails 'remarkable performance' but issues warning of further volatility

The trust, which holds £1.08bn in assets, did not fully benefit from the narrow rally in growth and equity investments, while the holdings in energy and commodities detracted from performance. 

Not only did the portfolio's oil and commodity exposure not offset the costs of protection, but increased the drag on performance, MacInnes and Yeo noted. Moreover, «the double whammy» of yen weakness and «surprising» sterling strength also hurt performance.

Changes to the portfolio in the period include reducing equities to a 14% exposure, while increasing equity downside protection. Portfolio duration was increased by adding long-dated US inflation-linked bonds and exposure to yen and the US dollar was increased whilst gold and copper exposure reduced.

The protections in the Ruffer portfolio are of three types. First, structural protection against a new regime which is likely to be