For an asset management firm with an emphasis on protecting investors’ portfolios, investing in Bitcoin is the last thing one would expect.
But for Ruffer Investment Company, the purchase and well-timed sale of Bitcoin at its peak has turned out to be one of manager Duncan MacInnes’ best calls of the past year.
This along with betting on inflation remaining sticky and taking large positions in inflation-linked bonds and energy stocks, has boosted the performance of the trust ahead its peers over the past year.
Performance of the trust over 5yrs
Source: FE Analytics
Below, MacInnes tells Trustnet why sometimes being right as a macro investor isn’t enough to make money, why he is using Homer Simpson as analogy for a position and why there’s nothing he won’t invest in.
What is your investment process?
We are trying to build an all-weather portfolio. We are willing to invest in most asset classes, anywhere in the world, and we are always trying to find convexity: heads I win, tails I don't lose much, payoff profiles.
Why should investors pick your fund?
There's a lot of funds out there that offer the illusion of diversification and the illusion of a differentiated process. We are we are genuinely different for two reasons.
One: our track record shows we've been doing this for 27 years, with a low correlation to equities or any other asset class.
Two: our approach of absolute return, un-benchmarked, all-weather investing, is a very different starting point to the more traditional approaches that are out there.
What have been your best and worst calls over the past year?
Our best call was exiting Bitcoin. We bought it at $15,000 in November 2020 and we exited in the week of the Coinbase IPO and Elon Musk being on Saturday Night Live, which was April 2021 and Bitcoin was in the $50,000s at that point.
The worst call was Adecco Group which we bought that in September 2021. It's a recruitment consultancy business, one of the biggest in the world and we bought it as a play on value, reopening, recovery, a booming economy, a tight labour market and wage growth.
We thought the macro case really stacked up and the stock itself: low leverage, 10 times earnings, 5.5% dividend yield, sounded awesome. But it's down 3%.
If you look at the other stocks that we bought for the same reasons, American Express, Berkshire Hathaway, they are all up much more, so we absolutely got the macro right.
We're a macro house and we try to express macro views through stocks, and sometimes it just doesn't quite go as planned.
Most exciting stock or position pick in the fund?
Homer Simpson once said that beer was the cause of, and solution to, all of life’s problems. I said in our annual report that oil stocks and financials were the cause of, and solution to, all of your portfolio problems.
The economy's booming, what's going to cause it to stop booming? Rising oil prices or interest rate rises.
So, oil stocks and banks, they're both going to benefit if the economy booms because they’re GDP sensitive, but they should also benefit if either of the things that could currently derail the economy happen.
Are there any sectors you won’t invest in?
Not really, we always try to keep the menu of what we can invest in as broad as possible. There's no such thing as bad assets, just bad prices. We try to keep an open mind.
How risky is your fund?
We're absolutely preoccupied with risk. I don't think our fund is very risky. I think we're relatively low risk, even though we've outperformed equities over time. If you look at our volatility – if that's your sort of thing – then we are a fairly low-volatility strategy, the max drawdown is less than 10%.
There's a whole sort of separate conversation about how the industry defines risk, because bonds are the cornerstone of low-risk portfolios, and yet today they offer really low nominal returns and negative real returns.
So actually, is that low risk? I mean, that sounds like a pretty bad idea.
Do you incorporate environmental, social and governance (ESG)?
We're not an ESG fund, and some ESG people might be horrified by the fact we've got quite a lot in the oil majors, but we actively engage with those companies and try to hold their feet to the fire to make sure that they're doing the right thing.
We would take the view that it is more important to be at the table in those discussions than to just divest and not own them.
Also, because many investors just wash their hands of anything that looks like bad ESG we think that creates an opportunity not just to engage and hopefully get those companies to improve, but to make money.
Peak ESG-hysteria was probably at the middle of last year and oil stocks have done very well since then.
What do you do outside of fund management?
I have three daughters under the age of four, so nothing. I have no hobbies. Just trying to survive until bedtime is my hobby.
But my job sort of is my hobby, I absolutely love it. I do potter about at the weekends reading an annual report.
I also spend a lot of time on crypto twitter. It’s the best source of unconventional investment thoughts. There’s a lot of rubbish on there as well, but I absolutely love ‘fintwit’, as it’s called.