As well as achieving top-quartile status for returns in its IT Global Growth sector since its launch in July 2004, it is by far the least volatile investment trust of its kind and the best performer during down-markets. Over a five-year period, lead manager Jonathan Ruffer has returned 94.3 per cent, second only to the Murray International Trust, which is a fraction ahead with 94.8 per cent.
However, in the risk/return standings the trust is streets ahead of its competitors. According to FE Analytics, the portfolio has an annualised volatility of 8.54 per cent over five years, compared with 16.77 per cent from its sector average. The second-least volatile Global Growth portfolio – The Cayenne Trust – is 2 per cent more volatile than the Ruffer Investment Company.
Performance of trusts over 5-yrs
Source: FE Analytics
The performance of the trust during the depths of the financial crisis was a particular highlight; it was the only portfolio among the four IT global equity sectors that managed to deliver a positive return in 2008, with 23.01 per cent.
Although the defensive strategy of Ruffer saw the trust lag its more cyclically focused peers in 2009 and 2010, it still participated in the QE-fuelled rally, with returns of 22.07 and 19.02 per cent respectively. However, it has underperformed its peer group over three years, although with significantly less volatility.
The trust’s record is particularly impressive given that it aims to deliver a return of at least twice the Bank of England base rate, which is equal to 22.74 per cent over five years.
It is currently trading on a premium of 3.19 per cent.
The portfolio
The fund’s biggest regional overweight in equities is Japan, which at the beginning of February made up 42 per cent of the portfolio's equity exposure. The CF Ruffer Japanese fund is among the portfolio’s top-10 holdings, as well as individual stocks such as Nippon Telegraph & Telephone and Inpex.
Emerging markets is the standout underweight, with only 1 per cent of assets invested in the Asia Pacific ex Japan region.
Ruffer Investment Company is one of the few in the Global Growth sector that can hold fixed interest holdings, which goes some way towards explaining its low volatility. Index-linked bonds remain the biggest overweight in this area and, even though they have come under mounting pressure in 2012, the managers of the trust say they will remain a cornerstone of the portfolio.
"They may have become dangerous to own after a stellar run last year but we feel they are even more dangerous not to own in a world of sharply negative real interest rates," they said.
"Our answer has been not to sell our index-linked bonds, but to increase the Beta of our equity portfolio in order to capture as much of the upside in equities as we dare."
According to FE data, the portfolio is up 3.01 per cent year-to-date.
Alternatives
Sebastian Lyon’s Personal Assets Trust is the most similar to Ruffer’s vehicle in terms of strategy and attitude to risk. Lyon, an FE Alpha Manager, has turned the trust's performance around since he took over as lead manager from Ian Rushbrook in March 2009. Since then, the £469m portfolio has outperformed the Ruffer Investment Company by 13.51 per cent, with only slightly more volatility.
Performance since Lyon took over Personal Assets Trust
Source: FE Analytics
The Personal Assets Trust also has a superior record over one year, although Lyon has a lot of work to do before he competes with Ruffer over five years and beyond.
For more adventurous investors, Bruce Stout’s Murray International Trust and Peter Ewins’ F&C Global Smaller Companies portfolio are good options. Stout’s trust tops the Global Growth sector over 10 years with returns of 253.72 per cent and it is also a top-three performer over one, three and five years.
It was recently highlighted as the most consistent global equity investment trust of recent years, given that it has outperformed its benchmark in each of the last 10 calendar years.
The expert's view
Simon Elliot, senior analyst at Winterflood Securities, believes the portfolio is well worth its 3.19 per cent premium for a long-term investor.
"The Ruffer Investment Company is a highly respected vehicle, especially with retail investors, and with good reason," he said.
"The trust does something a little bit different compared with its peers in that it’s essentially an absolute return vehicle which can make big calls in a lot of different areas. In the past it’s had a great deal invested in gold, as well as Japanese equities, which make up a big portion of the portfolio at the moment."
"As such it’s not really a pure global growth fund. We actually split the IT Global Growth sector in two – global growth and global growth specialist – and this portfolio falls into the latter."
"For those who are wary of the volatility that comes hand-in-hand with a pure equity play, this is a very good option," he finished.
Our verdict
This is an excellent option for risk-conscious investors who want exposure to a selection of different regions. Like its cousins in the open-ended universe such as CF Ruffer Total Return and CF Ruffer Equity & General, this is a portfolio that prides itself on above-average returns with below-average volatility.
While the managers have the flexibility to diversify their holdings with bonds, gold and other alternative assets, the bulk of the portfolio tends to be invested in the equity market.
If investors want an out-and-out global equity fund then a trust such as Murray International is probably a better bet; however, for someone wary about the outlook for global markets but who still wants to benefit from any potential upside, then this could be the ideal trust.