Ruffer Investment Company Limited Monthly Investment Report October 2020 (5677E)
07 November 2020 - 6:03AM
UK Regulatory
TIDMRICA
RNS Number : 5677E
Ruffer Investment Company Limited
06 November 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: ric@praxisifm.com
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END
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