25th Feb 2016 09:38
LONDON (Alliance News) - Ruffer Investment Company Ltd's investment manager evoked French philosopher Voltaire on Thursday, as it warned that the outlook for the year ahead is "as challenging as we can remember".
"Unlike many market participants we agree with Voltaire who said that uncertainty is an uncomfortable position but certainty is an absurd one," investment manager Ruffer AIFM Ltd, part of Ruffer LLP, said.
"Although the company is positioned defensively that is not the same thing as saying that it is immune to a market setback. We are hopeful that the positioning of the asset allocation is appropriate to achieve our capital preservation objective and, at the risk of getting ahead of ourselves, if we can preserve capital through the next crisis then there will be some mouth-watering opportunities on the other side," the manager added.
The company's net asset value per share fell to 206.98 pence from 218.76p over the course of the six months to December 31. After allowing for the dividends of 1.7p paid during the period, that equated to a total return of -4.6%. The company's share price also fell by 4.6% on a total return basis as the shares ended the period on a premium of 1.9%.
The target return of twice the Bank of England base rate rose 0.5% over the period and by way of context the FTSE All-Share total return index fell by 2.0%, the company said. Ruffer's objective is to achieve a positive total annual return, after all expenses, of at least twice the Bank of England base rate.
"After a strong first half to 2015, the second half of the year proved to be a difficult environment in which to meet our capital preservation objective let alone make a positive return. Detractors from performance included our Japanese equity exposure (-0.5%) and options (-1.8%)," Ruffer said.
"We were able to crystallise some profits in the option book through the volatility of the equity market selloff in August and September, but with the benefit of hindsight we could have done more," Ruffer said.
The manager said it would expect that part of its portfolio to make a significant positive contribution in the event of a "more extreme" market event.
"Although the loss in Japanese equities was relatively small, this masks a sharp decline in August and September when Japan was a victim of the suspension of a large part of the Chinese equity market. Unable to trade in Shanghai, investors used Japan as a proxy in order to reduce risk exposure," Ruffer said.
The manager said that the subsequent sharp rally in Japanese equities in October and November suggested that selling pressure was not based on fundamentals.
"In contrast to this technical story, we believe news flow has been consistently positive on Japan. The longer term prize of a return to self-sustaining growth and inflation will have a significant impact on the Japanese market, which is increasingly adopting western approaches to corporate governance and shareholder returns," Ruffer said.
"For the year, Japan once again confounded the sceptics, being the strongest performing major market (+18% in Sterling terms). Other positive events in the equity book were the takeovers of Hellermanntyton and Japan Residential Investment Company at respective premiums of 40% and 31%," the manager added.
Shares in Ruffer Investment Co were up 0.2% at 197.48 pence on Thursday morning.
By Samuel Agini; [email protected]; @samuelagini
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