16 July 2024
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 June 2024.
http://www.rns-pdf.londonstockexchange.com/rns/5591W_1-2024-7-16.pdf
The fund fell back marginally over
the month as equity markets continued to move higher, albeit in
increasingly narrow fashion. Over the month, the board have also
continued their buybacks, in the six months to 30 June 2024 the
board have purchased 25.4 million shares for a total of around
£68.2m which equates to 6.6% of the shares outstanding. These
purchases have added 0.4% to the company NAV.
The S&P 500 was up 4% over the
last month, whilst the same index equal-weighted was down by 1%,
this is illustrative of a world of fewer winners and more losers.
There is an adage that when markets are broad, they are strong, but
when they are narrow, they are weak.
Over the past nine months we have
managed to maintain a level of protection in portfolios we believe
will be essential when market conditions deteriorate. But in
contrast to the second quarter of last year, the growth assets have
contributed to ensure that the fund isn't retreating in the
intervening period. This has been driven by proactive portfolio
adjustments. Adding duration in the fourth quarter gave us a
positive year end; an increased equity weighting and dynamic
management of the portfolio's commodity exposure have supported
returns this year.
There is something of a dichotomy at
play in markets; many investors express concerns but these are not
yet reflected in their positioning. In a recent Bank of America
Fund Manager survey 69% of respondents consider the 'Magnificent 7'
to be the most crowded trade in markets, meanwhile about half of
those respondents expect large-cap US growth stocks (dominated by
the same seven names) to lead the market higher. There is no
telling how much crossover there was from individual respondents,
but it indicates a market displaying both uncertainty and great
confidence in a benign outcome, given the level of valuations. This
is a potentially dangerous combination, particularly when
positioning is increasingly extreme in nature (and when leverage is
involved).
Our predominant contention in the
short term is that investor positioning is yet to adjust to reflect
higher risk-free rates. Investors are currently paid more than 5%
to not take risk. Meanwhile, risk premiums (the additional return
an investor should receive for coming out of cash) are low,
particularly in the US. It might be the case that conditions remain
benign, but the potential upside of that outcome is limited. This
informs our continued focus on ensuring that the portfolio is well
positioned to make money should the certainties break and take
advantage of the opportunities any sell-off presents.
The yen remains a key protection; we
see many reasons for the yen to strengthen, but key to its role in
the portfolio is that if the yen is strengthening it is likely to
be against a backdrop of financial stress. Credit spreads give us
exposure should the current compressed nature of risk premiums
reverse. If liquidity is less readily available, a significant
re-pricing of corporate debt is likely. We must also remain
conscious of the need to participate should the current benign
environment persist; the combination of a 25% allocation to
equities, a recently increased position in oil plus exposure to
gold mining equities, should allow us to participate, but without
compromising our capital preservation mandate.
Enquiries:
Sanne Fund Services (Guernsey) Limited
Tracy Holloway
Email: RIC@apexfs.group
LEI: 21380068AHZKY7MKNO47