RICA is positioned to protect against inflation or a new leg down in equity markets…by Tom McMahon



Ruffer Investment Company (RICA) is designed to be an all-weather solution for investors who want to grow their capital over the long term without suffering significant drawdowns. The portfolio is built around a core outlook which sees the world re-entering a period of structurally higher inflation and is designed to do well in such an environment, which would be poor for conventional bond and equity funds. However, the manager, Duncan MacInnes, draws on a variety of assets and exposures which should prosper in different environments in pursuit of generating steady returns in all markets.

Duncan MacInnes is the lead manager following the retirement of Hamish Baillie (see Management), but works with a team of over 140 investment professionals at Ruffer who build other portfolios with the same basic strategy. Duncan uses the full range of assets, from conventional bonds and equities to complex derivative strategies and esoteric asset classes, offering the sophistication of hedge funds or family offices to the average investor.

Historically, RICA has functioned as an excellent hedge against the hidden risks in rising equity markets, having generated strong returns during the financial crisis of 2008 and the COVID pandemic of 2020 (see Performance). The company has a track record of outperforming equity markets in troubled periods but lagging in risk-on environments. Duncan thinks a further leg down in equity markets is probable, despite the bounce over the summer, and RICA is positioned accordingly.

The success over the years has seen RICA trade on a premium for long periods of time. Since the emergence of the pandemic, there has been significant share issuance to control the premium of share price to net asset value, with the company growing to £1bn in total assets.


Analyst’s View


RICA has generated highly desirable returns over the long run, achieving equity-like gains without massive drawdowns. As we discuss under Performance, the infrequency and low magnitude of the drawdowns are particularly striking, meaning that investors have experienced a smooth ride thanks to vigorous paddling beneath the surface in what is a sophisticated and dynamic portfolio. The pandemic has seen Ruffer at its best, with derivative strategies paying off well when the markets fell in early 2020, and then long-held, high conviction positions built around the return of inflation seeing good absolute gains during the reflationary recovery. However, the summer of 2020 saw one month, June, of indiscriminate selling in which RICA’s hedges didn’t pay off followed by one month, July, of exuberant buying in high growth, high-duration stocks which saw RICA underperform. This is a reminder that Ruffer won’t always have things its way in the short term but if Duncan has built the portfolio correctly there should be relatively few periods in which some hedges don’t work.

The return of a period of high and volatile inflation is a key conviction for the team and we think RICA is a valuable hedge against such an environment, even for those who don’t share this outlook. We find it striking that central bankers have been slowly raising their inflation expectations over the past year. While their models see this inflation subsiding as supply bottlenecks clear, their inability to see what effects these bottlenecks would have calls into question their understanding of the causes of inflation – and therefore their understanding of how to bring it down. In this light, the continued premium rating for RICA is no surprise.




  • Strong track record of making good returns while limiting drawdowns, especially in crises
  • Well-positioned for an inflationary environment, in contrast to many other equity strategies
  • Ability and willingness to use unconventional strategies to generate returns when conventional assets suffer



  • Long-term and contrarian approach can lead to periods of sluggish performance
  • Could suffer if central economic theses of the team are proven wrong – i.e. inflation falls significantly and/or real rates rise
  • Shareholders often have to pay a premium for new shares



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Disclosure – Non-Independent Marketing Communication. This is a non-independent marketing communication commissioned by Ruffer Investment Company. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

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