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Underperforming RIT takes 'active steps' to fight back

RIT Capital has added to its gold holdings, while Lord Rothschild pledges the investment trust will stick to investment fundamentals.

 
Underperforming RIT takes 'active steps' to fight back

Lord Rothschild, chairman of the popular RIT Capital investment trust , says ‘active steps’ have been taken to counter a disappointing six months for investors, adding that the management team will stick to investment fundamentals.

The £1.84 billion fund saw its net asset value (NAV) fall 4.9% over the six months to the end of September. With re-invested income this stood at -2.6%, still well below the 0.6% MSCI World Total Return Index.

Today's half year results cover a period of transition for the fund, with former head Micky Breuer-Weil stepping down in September, replaced by Ron Tabbouche, former head of investment at GAM.

‘Some half of the decline was accounted for by some of our defensive hedges moving against us in a rising market,’ wrote Rothschild (pictured above).  

‘The other negative factor was underperformance by a few externally managed portfolios.  We have taken active steps to address this.

‘We take the view that your company is unlikely to be successful in playing the game of "risk-on/risk-off" investing, or of making tactical shifts in our portfolio to catch the moves that have been such a feature of recent months.

‘If this means we lag temporary spikes in the market, so be it.  It is a necessary, and we trust rare, cost of protecting your capital.’

The trust's gold holdings have been increased in response to loose monetary policy. Exposure to US-based tech stocks has also grown, while Rothschild said the portfolio remained focused on cash rich global mega-caps.

22 comments so far. Why not have your say?

sgjhaghsdg

Nov 28, 2012 at 12:39

As I'm down 14% since buying a decent chunk of RCP shares, I'm not really seeing eye-to-eye with them regards my capital having being protected.

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AA

Nov 28, 2012 at 17:45

Not six months, RCP has been underperforming by its own very high standards for the past two years.

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Anonymous 1 needed this 'off the record'

Nov 28, 2012 at 17:48

has nat rothschild got an involvement?

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seahound

Nov 28, 2012 at 20:05

Anonymous 1 that thought has crossed my mind a couple of times !

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Anthony Tinslay

Nov 28, 2012 at 20:13

The problem in looking at any share price movement in relation to one's own buying/selling is a question of timing.. sgjhaghsdg is down 14% which is unfortunate but in April 2009 I bought at c825p and now at c1,150 it looks quite good..

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sgjhaghsdg

Nov 28, 2012 at 20:27

I'm chilled with volatility but if it says "capital preservation" on the tin. then one expects something better than the *worst* performing holding in a 50 share portfolio. Yes, RCP, you're this bad.

Fortunately, I bought an identical sized holding of Personal Assets at the same time and they *have* done the job, so the portfolio on a whole is neutral.

RIT are on the naughty step. I don't know whether to rebalance or give them the boot. My head says the former but they really don't seem to have a credible plan on how to turn things around.

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Anonymous 1 needed this 'off the record'

Nov 28, 2012 at 20:41

maybe these guys focus too much on "wealth preservation" and forget about the returns the rest of us need.......

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Anthony Tinslay

Nov 28, 2012 at 20:55

sgjhaghsdg -With a 50 share portfolio something has to be bottom at any one time and also something on top. I am also a fan of Personal Assets for many years and their performance over same period has been quite staggering. However PNL and RCP are as different as chalk and cheese. in terms of method. Your RCP investment has been very short term as must have been taken on last year.. Your decision now must surely be, either they could go lower or they will take and achieve positive action to improve considerably. All the fun of investing

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sgjhaghsdg

Nov 28, 2012 at 22:05

RCP was bought April 2011on exactly the same day as PNL. Since then, I have bought more RCP in my SIPP. This latter holding is also under water.

I'd top up if I could detect any coherent strategy but they seem to be all at sea.

I have no plans to sell but do wonder what they are doing to justify their fees. Perhaps if they fail to preserve capital then their fees need to be negative?

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Mickey

Nov 28, 2012 at 22:16

I sold RCP awhile back when it was reasonably fair to say they were under-performing for some time. I thought the significant increase in div was also a sign that things where going awry. Worth keeping an eye on with a view to getting back in.

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Ricardo

Nov 29, 2012 at 00:00

Has anyone got a reply to the question whether Nat Rothschild and his links with BUMI has contributed to RCP's misfortunes?

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Brian Stafford Garthwaite

Nov 29, 2012 at 08:27

I buy investment trusts such as RCP for the long term and ignore short term performance. Even the best managers can underperform at times. The long term performance of RCP has been superb. I have every confidence in Lord Rothschild, more than I would say about some of the investment "experts"

one encounters these days!

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AA

Nov 29, 2012 at 08:45

How long is long term? When a trust underperforms over two years and has only 6% growth over 5 years that is long enough for me. Over 5 years SMT growth is 28%, in the same sector, MYI is 86% in global browth and income.

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ajay

Nov 29, 2012 at 12:53

Anonymous1, seahound: Is your question serious??

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john_r

Nov 29, 2012 at 17:55

Some interesting comparisons ....

I' ve quickly scanned through a number of investment trusts looking for those that have generally performed well compared to their pre- crunch (2007/2008) peaks. The list is fairly random and doesn't allow for dividends nor is it a reflection of more recent performance.

What I was looking for was an indication of how well the investments would have recovered if I had held them through the crisis.

First the alleged safer ITs :

RIT -5% (5%down)

Personal assets 30% (30% up)

Ruffer A 47%

Caital Gearing 53%

Then some also rans ....

Scot Mortgage 2% (2% up)

Acorn Income 14%

Schroder Oriental Inc 24%

Murray International 35%

World healthcare IT 40%

Aberdeen asian Income 69%

Std Life smaller cos 72%

First State Scot Oriental SmCo 102% ( ie double )

Biotech IT 124%

Aberdeen Asian Sm Co 158%

Bear in mind that there are hundreds of IT's which haven't yet got back to their pre crisis peaks.

Draw your conclusions but it seems to me that safety seems to come at a cost.

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William Phillips

Nov 30, 2012 at 00:50

Personal Assets is hinting strongly that it can no longer afford to pay as big a dividend, if any. This is only a few years after it went over to quarterly payments and promised it would never pay less than the previous one and would try to make it rise with inflation, which it has not done for 3-4 years,

Meanwhile RIT has started to pay out much more.

Over ten years its share price total return is nearly twice as great.

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sgjhaghsdg

Nov 30, 2012 at 08:40

Read the latest Personal Assets newsletter for their very clear and open reasoning behind the changes to the dividend policy and I think you'll see that it makes sense for the typical investor in that trust.

I don't want a trust to hold income generating assets just to maintain dividends if those assets don't best match their allocation strategy. Neither do I want a trust to eat into capital to pay dividends, which is what they are now allowed to do.

Those who want to hold income trusts will find many to choose from and I don't want trusts that I have chosen for diversity and/or capital preservation to try and belatedly crowd onto the income band wagon.

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William Phillips

Nov 30, 2012 at 13:29

I thought Personal Assets was all about responding to its shareholders' needs. If so, why did the board make such a big deal a few years ago about paying dividends more often and always on a rising trend? Have dividends suddenly become a throwaway optional extra?

The truth behind the adulation we get from PNL's True Believers is that the directors messed their sums up, emptied their revenue reserves and are now having to beat a retreat, with Robin Angus claiming (without taking a poll or supplying any other hard evidence) that holders really, really don't mind.

For an investment trust to cut a dividend in money terms constitutes a rare and serious failure of direction. For a 'don't lose money' one it is worse.

This systemic breakdown should be considered together with the total return over long periods. It is substantially lower over a decade than one sees at Capital Gearing, RIT, British Empire, Lindsell Train, Manchester & London, Hansa, Caledonia and over five years at Ruffer. What price risk avoidance?

PNL is bigger on pompous flimflam than results. Those who swear by it tend to be the type of investor who thinks he always knows better than the common herd. Ian Rushbrook got swollen-headed too in his later days, and that is when PNL's lagging performance set in.

Squatting on a pile of cash and bullion and charging a lot to administer it is not the be-all and end-all of defensive investing.

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sgjhaghsdg

Nov 30, 2012 at 14:43

Rather than going off on one, I suggest you read PNL's statement regards dividends, which is based on frank and open discussions with shareholders both at meetings and elsewhere.

If after making yourself familiar with the facts (including the breakdown of their holdings, which is a long way from being just cash and bullion) you no longer want to own shares in PNL, then the sell button is there for your convenience.

Despite me grumbling about RCP being rather off the pace, I will continue to hold as it adds diversity, just as my holdings in RCP, CGT, RICA and many others do.

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William Phillips

Dec 01, 2012 at 12:16

Where did I write that PNL only held cash and gold?

Of course they have to have 'frank and open discussions' NOW, because the directors have blundered in their discount control and dividend policies' interaction and are about to inflict a loss of income on the shareholders. This will also make PNL's total return more volatile, against their professed wish to run a low-risk portfolio. It will be more dependent than before on gains from low-yielding asset classes. In truth it is much more speculative than the mood music suggests,

This huffy 'if you don't like it you can always sell' reaction is another characteristic of the fan boy. I never liked it enough to buy it, so it's not my problem.

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sgjhaghsdg

Dec 01, 2012 at 14:23

You said "Squatting on a pile of cash and bullion and charging a lot to administer it is not the be-all and end-all of defensive investing."

Those who prefer to make their investment decisions based on research may like to read the latest quarterly report from Personal Assets.

http://www.patplc.co.uk/secure/documents/quarterly/66.pdf

As well as discussing the dividend policy, the portfolio breakdown is given, and it's roughly 50% in equities, only 14% gold and has close to zero in cash.

As for income, yes it is rather in vogue right now, and fashion-conscious investors are screaming for it, but typical holders of Person Assets tend to be rather less emotional higher/top rate tax payers are don't really care for dividends.

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John Osborne

Dec 22, 2012 at 09:39

Am I right in saying that RITs good performance was just when Duncan Budge was (lead) manager ?

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