Monthly Investment Report October 2020

RUFFER INVESTMENT COMPANY LIMITED

(a closed-ended investment company incorporated in Guernsey with registration number 41996)

LEI 21380068AHZKY7MKNO47

Attached is a link to the Monthly Investment Report for October 2020.

http://www.rns-pdf.londonstockexchange.com/rns/5677E_1-2020-11-6.pdf

During October, the net asset value of the Company fell by 1.5%. This compares with a fall of 3.8% in the FTSE All-Share index.

A low allocation to equities and some profit taking in gold mining shares over the last two months softened the blow but was not enough to mitigate an overall loss in October. Concerns that bothered risk assets in September became more acute in October. Hopes faded of further US fiscal stimulus prior to the election and coronavirus infections surged across Europe bringing further curtailments in economic activity. Equity markets lost ground, with falls ranging from around 3% in the US to 10% in Germany. October illustrated again why we have been concerned for some time about the lack of effective protective assets. As equities fell, traditional haven assets such as US treasuries, UK gilts and gold also declined. Only the US dollar strengthened, validating both our suspicion that it may be one of the last traditional offsets available and its increased weighting in the Company.

The balanced portfolio of traditional assets is more vulnerable than ever. Our answer is to maintain an allocation to credit protections, which will provide a potent offset to deeper equity market falls, as was the case in the first quarter. We took significant profits earlier this year but once again increased the sensitivity of these positions as the summer ended. We think it is likely that there will be corporate failures before this crisis is resolved. Not every over-indebted company will be able to refinance or be rescued by governments.

Whatever the result of the US election, one thing seems certain - government will get bigger and further fiscal support will ensue. Whether this takes the form of tax cuts or a Green New Deal will be a function of both the occupant of the White House and the composition of the Senate. Either way, with inflation deemed quiescent this fiscal support will be accompanied by rock bottom interest rates. A debt dependent recovery will not be able to stomach higher interest rates and higher inflation will be tolerated as the price for rehabilitating the economy. The global fiscal fire hose will eventually have its desired effect. Inflation will emerge like Hemingway's bankruptcy - 'gradually, then suddenly'. Risk assets will enjoy the 'gradually' and hate the 'suddenly'. For this reason, we hold value equities for the heralding of inflation and inflation-linked bonds for when it arrives. Low inflation expectations are underpinning high valuations on many asset prices and 2021 looks like it could be the year when this unravels.

Enquiries:

Praxis Fund Services Limited

Gail Adams

DDI: +44(0)1481 755584

Email: [email protected]