RUFFER INVESTMENT COMPANY LIMITED
(a closed-ended investment company incorporated in Guernsey with registration number 41996)
LEI 21380068AHZKY7MKNO47
Attached is a link to the Investment Monthly Report for January 2020.
http://www.rns-pdf.londonstockexchange.com/rns/4821C_1-2020-2-10.pdf
During January, the net asset value of the Company fell by 2.2%. This compares with a fall of 3.3% in the FTSE All-Share index.
We wrote last month how markets have seemingly become immune to negative news. This continued as 2020 began. The US assassination of Qassem Soleimani, a top general in the Iranian Revolutionary Guard, brought only a temporary hiccup. Despite the clear increase in geopolitical tensions, within days stock markets had recovered, the price of oil had retreated to its pre-attack levels and gold had fallen back to $1,550. It would seem that the current administration in the United States is rewriting the rules that markets have known and evidently enjoyed for the past decades, yet investors remain unmoved.
Why did equity markets not flinch? Partial, if not full, responsibility, must reside with the actions of global central banks. Overwhelming any geopolitical fears was the support provided by the US Federal Reserve over the year end. They insist that this is "not QE" but it looks a lot like it. These moves allowed strategists to draw similarities with the Fed's actions around the turn of the millennium. Therefore, the logic goes, there is more to come from October to December's stock market rally. Hopefully, we at Ruffer aren't the only ones who remember how that particular top ended.
These dynamics held until the last few days of January when suddenly there was one news event markets decided not to ignore. We are no epidemiologists but can see how the shutdown of factories, the hit to travel and tourism and the damage to already fragile global trade, might hinder the upward march of stocks. The rise in equity markets last year was driven almost exclusively by valuation expansion and came despite falling economic expectations and stalling profits. Further progress this year probably requires some form of earnings growth, something which may now be under threat, and when equity markets are priced for near perfection, vulnerabilities inevitably arise.
The authorities may or may not bring the virus under control and this may be another example of bad news that markets can look through. We at Ruffer do not try to pick the moment when bull markets end, in fact quite the opposite. By creating a portfolio split between growth and protection assets we try to remove as much timing from the equation as possible. If these worries blow over, our equities, focussed on the UK and Japan, are capable of driving decent returns as evidenced by the 8.5% outturn for 2019. If this is the moment when protection needs to take over, we are confident that our credit and volatility protections stand ready to act.
On Thursday 27 February at 11:00am we will be holding our bi-annual shareholder update. This time around it will take the form of a webinar focussing on the investment strategy and outlook. If you would like to dial in then please contact [email protected] In the autumn the event will take place in Ruffer's London office and the directors of Ruffer Investment Company will be present and available to take questions from shareholders.
Enquiries:
Praxis Fund Services Limited
Gail Adams
DDI: +44(0)1481 755584
Email: [email protected]
