Ruffer romps home to double digit returns in 2008

Ruffer Investment Company returned 15.9% in the second half of last year, placing it at the head of its Global Growth and Income league table by a massive 15.4% over 2008.

Managers Jonathan Ruffer and Steve Russell said that the performance was due to a well-diversified risk portfolio, which had allowed it to hedge out falls and take part in a late-year rally.

The fund returned 16% in November and December after a broadly flat performance in the previous 10 months, and was also able to lock in gains from the re-rating of sterling against other currencies.

The £126.17 million fund is one of a minority trading at a premium, currently 4.6% above its per-share NAV of 142p at 148p.  

In a statement, the managers said: ‘The portfolio is constructed to preserve capital in just the type of financial dislocation that we have recently witnessed and to deliver a decent return irrespective of market conditions.

‘It is not by avoiding risk that we seek to preserve capital in difficult times, but by holding a wide range of risk assets that can deliver positive returns even when stock markets are falling.

‘By preserving capital in the first ten months of the year at a time when the FTSE All Share fell by 31% on a total return basis we were able to take benefit from the market rally in both equities and index-linked bonds.’

They added that they were convinced that governments around the globe will be forced to inflate away the massive burden of debt required to re-stimulate the world economy.

The fund currently has 40% of its assets in index-linked bonds, spread across the UK, US and Japan, including a 10% holding in the UK index-linked 2013.

Almost a third of the portfolio is invested in Japan, split equally between index-linked bonds and equities, principally high beta financials.

Having exited Swiss assets entirely on the back of concerns about investment bank liabilities and their potential impact on the Swiss Franc, the other principal play in the portfolio is gold.