A good 2025, performing in up and down periods: Ruffer Investment Company

RICA had a good 2025, performing in up and down periods…by Thomas McMahon

Overview

 
Ruffer Investment Company (RICA) aims to deliver positive returns in all environments, which has led it into an increasingly unconventional asset allocation to address rapidly evolving markets in which old ways of thinking no longer work. Over 2025, the trust delivered a double-digit NAV return (see Performance), generating positive returns when markets rallied as well as when they fell in the tariff tantrum following Liberation Day, when RICA really came into its own. Derivative strategies targeting equity markets, credit spreads and volatility were key to the performance in that downmarket, and remain an important component of the portfolio.

The managers, Jasmine Yeo, Ian Rees and Alexander Chartres, draw on the research of a large team of analysts and managers to implement strategic ideas, which should perform in different potential scenarios. The derivative strategies have worked well from a protective point of view, while among the growth assets allocations to cheap pharmaceutical stocks have done particularly well, as have some Chinese tech names. Higher average inflation is likely to remain a defining characteristic of the western economy for many years, in the managers’ view, and an allocation to gold mining equities has also performed well over the past year and more, bought as assets that should perform when inflation and inflationary fears are high.

RICA’s shares have traded at a modest, low-single-digit Discount to NAV since 2023, averaging 3.5% over the past year. The board has committed to meaningful buybacks, managing to keep the share price close to NAV in a period in which equities have been strong and funds with a capital preservation mandate less sought after. This means that the low volatility in the NAV has not been counteracted by discount movements, a feature we think is important for investors with a capital preservation mindset.

Analyst’s View

Equity markets have delivered excellent gains over the past two years, and it’s natural that many investors may be thinking less about downside risks than they might in other circumstances. But there are cracks appearing in stock markets as it becomes clear that AI will be as destructive as is creative for existing businesses, while the war in Iran is a reminder the geopolitical situation remains volatile, with a clash between the US and its rivals that is seeing economies realign during peacetime and numerous potential sources of conflict. We think RICA has shown itself to be a valuable investment during past crises, and its unconventional positioning, based on deep thinking about the real drivers of the economy and of markets, could come into its own when some of the cracks start to widen.

In particular, we think many investors may have been lured back into bonds for protection and diversification, with a rate-cutting cycle apparently entrenched. However, inflation is proving remarkably persistent: strong commodity prices last year would presage inflation this year, notwithstanding the energy shock from the war in the Middle East. Reshoring, electrification and AI infrastructure construction are all trends supporting high demand for raw materials, while political pressures to raise wages remain strong. We don’t think bonds will protect when equity markets sell off as they have done in the past, and Ruffer could be a good alternative to hold to serve that function in a portfolio. If the conflict persists and market conditions deteriorate, the protective strategies could deliver meaningful positive returns, while the portfolio also has exposure to assets that should participate in any relief rally on a ceasefire.

Bull