Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors, your investment process and the make-up of the investment team?
The central idea behind how we invest is that if you protect capital from the catastrophic moments that seem built into financial markets, you end up making more money in the long term. The secondary insight we have is that this is really hard to do. To do it well we feel we need to take this aspiration really seriously. That means the whole firm is focused on one approach. We have to own ourselves. We also need to be able to tolerate comparatively underwhelming performance at times. The lesson we draw from peers who have tried to run similar strategies is that trying to do this as part of a range of other products muddies your thinking and being beholden to shareholders means getting sacked when you should be holding the line. We also feel that the temptation to take more risk to maintain levels of return or a target is counterproductive to the core aim.
We look to make sure our investor's never lose their shirt. The process involves taking a hard look at asset allocation, synthesizing qualitative and quantitative analysis and bringing a good dose of long-term historical insight. The team at Ruffer is both broad and deep; we can call on a brilliant research team and a lot of great investors. We are really proud of how we have grown talent internally. My two co-managers on the Ruffer Total Return Fund were promoted in 2019 and came here from university. We think the ability to do that shows we can build and maintain a sustainable, long-term business.
How have you been trying to weather the storm caused by the Covid-19 pandemic and what could be the longer-term implications for your strategy?
We make it our business to think around the next corner. No one could have predicted COVID, but a market shock seemed likely to us and we were prepared accordingly. The result being that we did not suffer any drawdown in March 2020 - in fact we made money. Looking forward, there are some real challenges playing out for conventional asset allocation models. It's a great time to be running a strategy like ours; performance has been good and we feel prepared for what's next. It does concern us that this is a generational opportunity for people to lose their wealth though. We think we can help be an answer to that.
Can you identify a couple of key investment opportunities for your fund you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level.
At the moment you are seeing gyrations between ‘value' and ‘growth' stocks in most major markets after a period when technology and growth were the only winners. We see these gyrations continuing and we are excited about the opportunity for those beaten up value stocks. Investors are by and large stubbornly sticking to the same game plan they have had for 40 years. We think continuing low interest rates and higher inflation means tearing up the existing rulebook. Inflation-linked bonds are, despite the title, a hugely underrated inflation protection. Holding the longer duration ones in particular could be hugely profitable, but you need to know how to integrate them in a portfolio because they are volatile. We made money in the first quarter of 2021, despite it being the worst period for long duration bonds for many years. The path ahead will be bumpy, but we are prepared for these bumps and have a clear view of where markets are heading in the long term.