Ruffer Investment Company shows up open-ended rivals
Retail investors tend to automatically dismiss closed-ended funds when it comes to selecting a multi-asset portfolio, but the are some good options in the space.
By Joshua Ausden, News Editor, FE Trustnet
Thursday July 26, 2012
The best-known investment trusts are generally long-only, long-term equity portfolios, but the Ruffer Investment Company
challenges this conception.
The £280m portfolio, which is headed up by Hamish Baillie
and FE Alpha Manager Steve Russell, sits in the IT Global sector, but has a significant proportion of its assets invested in government bonds, corporate bonds, gold and other alternative assets.
According to FE data, Russell and Baillie currently have 57 per cent in equities, 10 per cent in index-linked gilts and 5 per cent in gold and gold equities – reflective of many portfolios in the IMA Flexible Investment, Mixed Investment 20-60% Shares and Mixed Investment 20-85% Shares sectors.
However, the fund’s record is second to none in the open-ended universe. It has returned 93.2 per cent over five years, outperforming all four multi-asset sectors in the IMA universe by at least 80.62 per cent.
The portfolio is only more volatile than the IMA Mixed Investment 0-35% Shares sector over the period, which by definition has a significantly lower proportion invested in equities.
Performance of trust vs sectors over 5-yrs
Source: FE Analytics
||1-yr returns (%)
||3-yr returns (%)
||5-yr returns (%)
|Ruffer Investment Company
|IMA Mixed Investment 0-35% Shares
|IMA Mixed Investment 20-60% Shares
|IMA Mixed Investment 40-85% Shares
|IMA Flexible Investment
Not one of the 485 mixed-asset funds in the unit trust and OEIC universe has come anywhere close to matching this performance.
The hugely popular CF Ruffer Total Return fund, which is co-managed by Russell, comes closest, with returns of 55.46 per cent – almost 38 per cent less than its closed-ended counterpart.
The highly rated Trojan
fund, managed by FE Alpha Manager Sebastian Lyon
, has returned 46.6 per cent over the period.
The Ruffer Investment Company is slightly off the pace in the returns stakes over three years, although it has still comfortably beaten all four sector averages.
It has also beaten the CF Ruffer Total Return fund, albeit with slightly more volatility.
Performance of trust vs fund and sectors over 5-yrs
Source: FE Analytics
Unlike open-ended funds such as CF Ruffer Total Return, the managers of the Ruffer Investment Company don’t have to contend with significant inflows or redemptions. Thanks to its closed-ended structure, there is also no risk of the portfolio soft-closing to new investors.
At present, the trust’s biggest off-field bet is in Japanese equities, which make up 24 per cent of assets under management (AUM) – the single largest sector weighting.
So far this position has failed to pay off, evidenced by the fund’s relatively poor record over one year.
However, the managers remain confident that their exposure to the battered region will pay off in the medium- to long-term.
The CF Ruffer Japanese fund and Nippon Telegraph & Telephone are among the managers’ largest holdings.
As the trust’s low volatility and max drawdown suggest, Baillie and Russell put particular emphasis on capital preservation.
"Much more important than getting our bets correct is that the portfolio is positioned to keep our investors’ capital safe," the managers said in a recent note to investors.
"We hope so but hope is a long way from certainty and this discomfort is no bad thing in the capital preservation game."
The trust has an annual management charge (AMC) of 1 per cent and does not have a performance fee.