Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

RIT Capital to keep record pound call in ‘complacent’ world

RIT Capital to keep record pound call in ‘complacent’ world

RIT Capital intends to keep its exposure to sterling around record highs in the ‘increasingly challenging’ investment landscape.

In the six months to the end of June, the Citywire Selection investment company increased its exposure to the pound to a record high.

Given the global reach of the portfolio, the currency’s appreciation since the turn of the year has impacted performance, with a 2.4% return on the net asset value (NAV) underperforming the 4.1% gain on the MSCI All Country World Index over the period. In dollar the portfolio outperformed, returning 5.7%. 

RIT intends to maintain this high exposure to sterling, which stood at 52% at the end of June.

The trust’s chairman Lord Rothschild (pictured) told the market: ‘Mindful of the Bank of England's continued hawkish stance we will maintain our relatively high level of exposure to sterling, a portion of which is held through options as we see risks ahead which may cause a reversal of the currency's upward trend.’

RIT’s reluctance to participate in the liquidity rally also impacted  performance.

‘Given current stock market valuations, further market appreciation will continue to be influenced by central bank policy of creating money and maintaining low interest rates,’ Rothschild said.

‘We have become uncomfortable in participating in liquidity fuelled markets and are sceptical as to whether the current degree of investor complacency can be maintained.’

RIT is finding it increasingly hard to find attractively valued investment opportunities likely to benefit from structural tailwinds and not short-term monetary policies.

‘The search has become increasingly challenging,’ Rothschild said. ‘Almost every asset class is highly priced by historical standards at a time when the precarious geo-political situation in the Middle East and Russia could undermine the fragile economic recovery which central bank policy has helped to bring about.’

Against this backdrop RIT’s individual stock portfolio, which accounts for 20% of NAV outperformed.

This was thanks to the decision to increase holdings in emerging markets and Japan, while it reduced exposure to technology and growth ahead of the correction.

Returns on its external stock portfolio also fared well, although it said some the winners over 2013 had underperformed this year. RIT intends to increase the concentration here to preserve performance. ‘We continue to concentrate our holdings into a reduced number of talented managers, giving us greater focus and allowing a more meaningful impact to our NAV,’ Rothschild said.

Meanwhile the trust’s private equity portfolio, which accounts for 11.7% of assets, returned 4.6% thanks to the agreed realisations of Metron and Chart Show.  The portfolio was also boosted in the second half through Legg Mason’s acquisition of Martin Currie.

The underperformance in the last six months means trust 6.7% return over the last 12 months is 8.3% below the benchmark's gain. However, over 10 years the trust has outperformed, returning 150.1% versus 105.7% in the benchmark.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play JPM’s Negyal: Back divis to temper EM volatility

JPM’s Negyal: Back divis to temper EM volatility

Omar Negyal, co-manager of the JPMorgan Global Emerging Markets Income trust, says a dividend approach to emerging markets reduces the volatility of investing in the asset class.

Play WMR: Why Russia will lose this war

WMR: Why Russia will lose this war

Author and journalist Adam Lebor believes a perfect storm is brewing when it comes to the Russian economy. .

Play WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

Chief economic adviser to London mayor Boris Johnson outlines the geo-political risks in Asia and explains why the risk of another eurozone crisis must not be underestimated.

Your Business: Cover Star Club

Profile: 'new normal' now is as dangerous as when it was applied to tech

Profile: 'new normal' now is as dangerous as when it was applied to tech

7IM's CIO Chris Darbyshire says he has been re-energised by his new role, but has little time for 'new normal' doom-mongers

Wealth Manager on Twitter