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Trust Insider: RIT - cautious at both the wrong and right times

by James Carthew on Mar 18, 2014 at 00:01

Trust Insider: RIT - cautious at both the wrong and right times

I last wrote about RIT Capital Partners (RCP) in March 2012. At the time, although its long-term performance numbers were impressive, its short-term performance was starting to suffer relative to the peer group.

That picture has changed a little since then. Over 10 years, RCP’s net asset value performance ranks it fifth out of 21 global growth funds and sixth out of 22 funds over three months, so there are signs of recent improving performance.

However, over the medium term things are less rosy. This is largely the consequence, as I highlighted in a previous note, of a cautious stance on markets.

A personal approach

RCP’s fate is in the hands of its chairman and largest shareholder, Jacob Rothschild. As I suggested last time, there is a certain attraction in investing alongside someone as well connected and experienced as him.

RCP accounts for a sizeable chunk of his personal wealth and therefore, naturally, he is likely to be cautious.

However, the ethos of the fund is about passing down wealth to the next generation (Jacob’s daughter Hannah has just joined the board) and so, while the chairman’s statement taken from RCP’s latest annual accounts highlights the fund’s commitment to the preservation of shareholders’ capital, it is also focused on real growth of capital.

It uses RPI +3% as its main benchmark but is a bit more adventurous than most funds with an absolute return objective, and the management is also trying to beat the MSCI All Countries World index.

They can also take a genuinely long-term view. For instance, it is interesting RCP says its closed-end nature and stable shareholder base allow it to be more patient than most private equity limited partnership structures.

In retrospect, RCP was overly risk-averse in 2011/12. I mentioned last time that the portfolio was positioned defensively then. The management thought there were glaring risks to the global economy and that it made sense to hold large quantities of cash to take advantage of potential market set-backs.

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