17 January 2025
RUFFER INVESTMENT COMPANY
LIMITED
(a closed-ended investment
company incorporated in Guernsey with registration number
41966)
(the
"Company")
Attached is a link to the Monthly
Investment Report for December 2024:
http://www.rns-pdf.londonstockexchange.com/rns/6606T_1-2025-1-16.pdf
December proved to be a
disappointing month for those expecting a Santa rally, with bond
yields rising and equities giving back some of their early winter
gains. The major market event during the month was the decision by
the US Federal Reserve (Fed) to trim interest rates by a further
0.25%, as had been widely anticipated. The decision was delivered
with a hawkish tone, suggesting the Fed sees an economy in need of
only modest further monetary support and less than the market had
anticipated.
The move higher in global bond
yields hindered the fund's interest rate sensitive assets, namely
index-linked gilts and gold mining equities. An additional headwind
came from exposure to the yen as the currency depreciated against
sterling over the month. We made a small addition to the fund's
long-dated index-linked gilts in December, in reflection of the
rising value they now offer. Yields on these long-dated issues are
now near where they were during the short-lived, but tumultuous,
Truss government in 2022. Despite seeing decent value should one
hold to maturity - eg the real yield on the 2068 index-linked gilt
is now +1.7% - we have resisted the temptation to add materially to
the duration, which remains around two years. It's also
worth noting that over the year the board have continued their
buybacks. In the year to 31 December 2024 the board have purchased
50.2 million shares for a total of around £136.2m which equates to
14% of the shares outstanding. These purchases have added 0.8% to
the company NAV.
In a world where the correlation
between bonds and equities can no longer be blithely assumed to be
negative, our duration management will remain more tactical than it
had been in the previous decade. Thus far equities, notably those
in the US, have shrugged off this challenge from higher long-term
yields as economic conditions remain reasonably robust, but we are
rapidly approaching levels at which rising yields have previously
proved to be damaging for equity valuations.
Today our focus sits firmly on our
primary aim of capital preservation. Looking back at markets at the
end of the year, we see a landscape of great complacency and
over-optimistic assumptions. This is most clearly illustrated by
the extreme valuation levels and concentration in US equity
markets, which matter for most investors given their dominance of
global equity indices, as well as tightly compressed credit spreads
and of course the euphoria in crypto assets.
An area of frequent inquiry is 'Will
it all be worth it?' How much will Ruffer have to make when the
market breaks to justify the pain? The answer: if events play out
as we expect, we should experience very healthy returns (at a time
when conventional portfolios are suffering). The oft overlooked
second part is the pivot of the portfolio to buying distressed
assets in the crisis. We did this effectively in 2003, 2009 and
2020. The power of the Ruffer model - what makes it worth it - is
to be on the front foot as a buyer when everyone else is a seller,
setting the portfolio up for decent gains in the recovery years
post crisis.
Enquiries:
Sanne Fund Services (Guernsey) Limited
Company Secretary
Nicole Liebenberg
DDI: +44(0)20 3530 3653
Email: ric@apexgroup.com
LEI: 21380068AHZKY7MKNO47