Ruffer Investment Company Limited Monthly Investment Report - June 2019 (8241E)
July 08 2019 - 8:30AM
UK Regulatory
TIDMRICA
RNS Number : 8241E
Ruffer Investment Company Limited
08 July 2019
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 June
2019.
http://www.rns-pdf.londonstockexchange.com/rns/8241E_1-2019-7-8.pdf
During June, the net asset value of the Company rose by 1.9%.
This compares with a rise of 3.7% in the FTSE All-Share index.
Following January's handbrake turn on the path of interest rates
by the US Federal Reserve, 2019 has so far been a profitable year
for most investors, and the Company has benefited with NAV rising
by 4.9% on a total return basis. Equities, bonds and credit have
all appreciated in value, while hopes of lower US interest rates
took the gold price up 8% in June in US dollar terms, reaching a
five year high. And therein lies the rub. Global bond markets are
signalling sharply decelerating economic activity, with $13
trillion marking a new high level of negative-yielding government
bonds, and also the need for immediate rate cuts, with a full 1% of
easing over the next twelve months now priced into US rates.
Equities meanwhile march blithely on, their raffish insouciance
seemingly blind to the risk of profits coming under pressure as
economic activity slows. It seems very hard for both these markets
simultaneously to be right, and at Ruffer our tradition has always
been to focus on the mousetrap rather than the cheese, hence our
reluctance to raise the Company's equity exposure from its present
level of around 39%.
While in May equities were clearly spooked by the US-China trade
spat, June's recovery owed something both to interest rate hopes
and to heightened expectations that a trade deal might be struck at
the G20 meeting in Osaka. A commitment emerged that talks should be
resumed, but specifics and details were conspicuously light.
Unsurprisingly, the Company's credit protections suffered a
small loss in June as optimism returned. We would, though, be very
surprised if slower economic and profits growth did not bring about
higher borrowing spreads and downgrades in corporate credit. Not
only are 50% of outstanding investment grade corporate bonds rated
BBB, if corporate credit were assessed on borrowing ratios alone
45% of the entire stock of investment grade bonds would be junk.
Furthermore, benign borrowing data for the aggregate corporate
sector disguises increasingly skewed distributions of profitability
and debt. While at present investors seem happy to bid up credit on
the basis of a benign interest rate outlook, investors seem equally
content to ignore precisely why the interest rate profile has
changed, viz slower growth. This investor myopia entirely convinces
us of the need for the fund to carry protection against a
deterioration in credit markets.
Enquiries:
Praxis Fund Services Limited
Shona Darling
DDI: +44(0)1481 755528
Email: ric@praxisifm.com
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END
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