The firm is best-known for its investment trust – Ruffer Investment Company – but it also has a number of specialist open-ended funds, and it was these that won it the accolade. The firm’s four FE Alpha Managers set it apart from other top boutiques such as Troy and Unicorn and have made its funds popular with the country’s leading advisers.
FE Trustnet took into account each group’s number of FE Alpha Managers, the crown ratings of its funds and the number of times they appear in the AFI portfolios.
Ruffer came top with 86 points, well ahead of second-placed Troy – with 67 – and third-placed Unicorn, which scored 64.
The firm, like Troy, is known for putting an emphasis on capital preservation, and it was its performance in these areas that saw it top the rankings table.
David Ballance and Steve Russell of the CF Ruffer Total Return and institutional CF Ruffer Absolute Return funds are both FE Alpha Managers.
In addition, the Total Return fund appears in the AFI Cautious and AFI Balanced portfolios, selected by a panel of the country’s leading IFAs.
The fund tops the IMA Mixed Investment 20%-60% Shares sector over five years, with returns of 68.17 per cent – more than twice those of the average fund.
Performance of fund vs sector over 5yrs
Source: FE Analytics
The £2.7bn fund’s performance in 2008 explains its sector-leading position; in that calendar year it made 20.86 per cent while the sector lost 15.84 per cent.
Recent returns have been more modest and the portfolio sits only marginally ahead of the sector average over three years, according to data from FE Analytics.
In an exclusive interview with FE Trustnet last year, Russell explained that the team was expecting a global recession and a period of high inflation in the UK as western governments tried desperately to clear their debts.
This month he reaffirmed his pessimistic view, saying that the recent rally was a result of artificial stimulus packages and would return to haunt investors in future months.
Alex Grispos’ CF Ruffer Equity & General is another fund to have done outstandingly well over five years thanks to its strong performance in 2008.
The £176m fund, which sits in the IMA Flexible sector, has made 65.76 per cent over the past half-decade time while the sector is up just 27.57 per cent.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Anthony Bolton’s Fidelity China Special Situations trust is Grispos' second-largest holding and it has served him well in 2013: the trust is up 14 per cent year-to-date.
Mary McBain’s five crown-rated CF Ruffer Pacific sits in the IMA Specialist sector, so is overlooked by many investors looking for Asian exposure.
The fund is only £187m in size, but has beaten the MSCI Asia Pacific benchmark over one, three and five years, and its annualised volatility of 12.99 per cent is substantially below the 19.12 per cent of the MSCI Asia Pacific benchmark.
Troy has only one FE Alpha Manager, Francis Brooke, but scored highly thanks to its suite of funds with high crown ratings.
Unfortunately for investors, its two best-performing funds are now soft-closed: both Trojan and Trojan Income have five FE Crowns but are unavailable to new investors.
However, they can still get access to Gabrielle Boyle’s £90m Trojan Capital fund and the £80m Spectrum multi-manager fund.
Like Ruffer’s managers, the team at Troy is known for being cautious about the recent equity rally, and the Spectrum fund’s better performance came a few years ago.
While it sits near the top of the sector over five years, over three it has slipped into the second quartile and over the past year it is in the fourth quartile.
CF Ruffer European is the largest holding in the fund, which also has a significant position in gold bullion.
Third-placed Unicorn has the highest average crown ranking for its funds, but slipped down the table due to a lack of enthusiasm among the AFI panellists.
The boutique’s funds have a more aggressive, growth-oriented emphasis, with Unicorn Mastertrust, Unicorn Outstanding British Companies and Unicorn UK Income all having been awarded five FE Crowns.
Unicorn Mastertrust is a fund of investment trusts run by Peter Walls. It tops the IMA Flexible Investment sector over three years, with returns of 44.04 per cent.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
The fund is also a top-decile performer over 10 and three years, albeit with a volatility that is higher than the sector average.
The five crown-rated Unicorn UK Income fund, run by FE Alpha Manager John McClure, sits top of the IMA UK Equity Income sector over one, three and five years.
It has the fourth-lowest volatility of any fund in the sector over the past half-decade.
Richard Troue, investment analyst at Hargreaves Lansdown, says there are a number of reasons why boutique managers often outperform their counterparts at larger institutions.
"If a manager is working for a boutique, they can be less constrained by benchmarks, whereas at some of the larger houses the managers often keep a close eye on them, especially if they run a lot of institutional funds where the investors are more often satisfied with a 'benchmark plus two' result," he said.
"More importantly, often the managers at boutiques own the business themselves, so the success or failure of that business has consequences for them. If they do not perform, they will lose assets or not gain them in the first place."
Troue explains that often the managers at boutiques earn a lower salary than those at the large institutions, but are rewarded through their share in the company, meaning their remuneration is more directly dependent on their success.
It is not all positive however: Troue points out that "key man risk" tends to be higher at boutiques, meaning that if an individual star manager leaves, it has more of an effect on the fund and the company.
For this reason, he suggests it is wise to hold funds from both large and small institutions.
Later this month, FE Trustnet will be speaking exclusively to Steve Russell of Ruffer. Please leave your questions for him in the comments section below.