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RIT Capital rewarded for pound, gold and government bond calls
by Dylan Lobo on Aug 16, 2013 at 10:23
A short position in government bonds, a reduction in gold exposure and a bullish turn on sterling helped RIT Capital deliver a solid return in the first half.
The £2.1 billion Citywire Selection trust, which is managed by Ron Tabbouche and is known for its cautious investment approach, saw its net asset value rise by 13.8% in the six months to the end of June. This compares to a total return of 8.5% from the FTSE All Share and a 16% rise in the MSCI World index.
RIT attributed its return to its bearish stance towards government bonds as economic health improved.
'Recognising that US authorities would face difficulties in suppressing bond yields in the face of an improving economy, we held short positions in government bonds during the period,' chairman Lord Rothschild told the market.
The trust also cut its exposure to gold, helping it sidestep much of the price slump as investors shunned the precious metal's defensive qualities in favour of risk assets.
Rothschild also highlighted the increase in exposure to sterling from 16% to 31% and a hedge on the yen as beneficial, while the decision to increase its weighting in Japanese equities on the back of 'Abenomics' also proved to be fruitful.
In other moves, Rothschild cut its holdings in emerging markets and used the proceeds to add to positions in US equities.
Rothschild said the trust would continue to target firms it believes can survive once the era of quantitative easing comes to an end.
'As recovery still relies so heavily on central bank creation of money, the search for quality has been our main focus,' Rothschild said.
'We continue, even so, to research and identify companies and special situations that would benefit from the much-needed transition from growth created by printing money to one of more sustained growth.'
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