Fund boutique Ruffer has all the time prided itself on making investments that go towards the herd, boldly advertising and marketing its method as “intentionally totally different”.
However its contrarian stance has left the funding home delivering such poor returns over the previous two years that even money has carried out higher.
On the coronary heart of Ruffer’s thesis was the conviction that the all mighty US inventory market was braced for a crash.
That decision — one which remains to be at odds with the view of 70 per cent of fund managers in Financial institution of America’s newest survey — has proved fallacious.
The US dodged a recession regardless of runaway inflation and the fast rate of interest rises of 2022 and 2023 aimed toward choking it off. Regardless of considerations about frothy tech valuations, the US fairness market has been resilient.
In 2023, because the S&P 500 delivered returns of greater than 20 per cent, Ruffer’s Whole Return fund misplaced 6.3 per cent. The Ruffer fund adopted that efficiency up with a 1.8 per cent decline the yr after.
Co-founder Jonathan Ruffer, the agency’s chair and a multi-millionaire philanthropist, stays adamant the corporate’s bearish funding technique shall be vindicated.
“It isn’t accidentally that we nonetheless have a portfolio which might take full benefit of a system shock of some magnitude,” he stated within the agency’s funding evaluate in January.
The issue, although, is that Ruffer sells itself as an “absolute return” fund.
Arrange in 1994 by Ruffer, Robert Shirley, the 14th Earl Ferrers, and Jane Tufnell, now chair of ICG Enterprise Belief, the agency has gained a status for serving the well-heeled and now runs some £19.5bn throughout 9 funds, together with its flagship £1.7bn Whole Return product.
Its intention is to protect buyers’ cash, even in periods of market turbulence, and beat returns on money. Even when Ruffer’s view of the US is fallacious, its funding technique ought to nonetheless ship optimistic outcomes.
Within the years during which Ruffer’s Whole Return fund misplaced 6.3 per cent and 1.8 per cent, the Financial institution of England’s base fee averaged 4.7 per cent and 5.1 per cent respectively.
Ruffer’s lengthy file has confirmed its capability to climate monetary storms.
The agency cemented its status as a preserver of wealth in the course of the bursting of the dotcom bubble on the flip of the millennium, when it returned 16.8 per cent in 2000 even because the inventory market crashed.
Ruffer once more delivered 16 per cent in 2008 in the course of the international monetary disaster, and 16.7 per cent in 2020 in the course of the Covid pandemic. Since 1995, the yr after Ruffer’s founding, its foremost technique has delivered 8 per cent a yr on common after charges.
However the latest weak efficiency has left buyers and advisers questioning whether or not Ruffer has misplaced its shine, regardless of the co-founder’s optimism.
“Ruffer positioned itself as a boutique for the discerning investor, with a slight air of snobbery about them,” stated Ben Yearsley, a managing director of consultancy Fairview.
“However as a ‘tremendous bear’ they’ve had a really robust two years. They received the top-down macroeconomic name on the US economic system fallacious.”
Macroeconomic calls are made by a duo: Henry Maxey, who turned chief funding officer in 2010, and Neil McLeish, named co-chief funding officer in 2023.
They set the funding course of — one of many penalties of a gradual shift since 2010 away from the boutique’s trio of co-founders — which fund managers are then anticipated to implement with minor variations throughout the agency’s funds.
As Ruffer expects inflation to stay excessive and rates of interest to be extra unstable, its funds maintain sizeable positions in gold and long-dated, inflation-linked bonds as safety. Greater than a tenth of the Whole Return fund is held in money. Derivatives, together with credit score default swaps, are used as one other type of safety.
However that defensive positioning has not succeeded in shielding the agency from losses. Ruffer Funding Firm, the agency’s belief, stated in an annual report that 2023 was “the worst” within the historical past of Ruffer.
Peter Sleep, a fund supervisor at Callanish who backed Ruffer when he was at Seven Funding Administration, stated he had “seen a run of flat efficiency earlier than” however famous that “2023 was unexpectedly poor given its disclosed holdings of money, quick time period bonds, and equities”.
Some buyers are voting with their ft. Seven Funding Administration, which manages £27bn, advised the Monetary Occasions that it was pulling out the £1.1mn it had invested with Ruffer Whole Return.
“We consider there are a number of inside and exterior components which have made it an more and more difficult atmosphere for Ruffer and in the end led to them lacking their key goals,” stated Asim Qadri, funding supervisor at Seven.
Ruffer’s difficulties lengthen past poor efficiency.
The group has lower almost a tenth of its workforce, amounting to greater than 30 roles, over the previous two years, one thing the agency stated was the consequence of choices to “prioritise funding on the wants of our purchasers and our progress ambitions within the UK and internationally” with “fewer and totally different roles” required in some a part of the agency.
Duncan MacInnes, certainly one of its high fund managers, abruptly departed in mid-February in a transfer that an individual near the corporate stated was unrelated to the broader job cuts.
Individually, the agency has needed to navigate ties to Crispin Odey, one of many agency’s authentic buyers, who the FT reported in 2023 was going through allegations of sexual harassment, which Odey strenuously denies.
Ruffer moved to sever ties with Odey by altering the controlling entity of Ruffer LLP and Ruffer confirmed that there has since been no connection between Odey and the operating of, or oversight of, Ruffer LLP — though a few of Crispin Odey’s household nonetheless profit from the funding.
One former Ruffer investor who bought their stake in Ruffer following stories of the allegations towards Crispin Odey stated that since then, “efficiency has been poor, charges are excessive . . . Frankly, money or gilts are higher choices”. Ruffer declined to remark.
And Ruffer can be getting ready for the retirement of its chair, Jonathan Ruffer, who has been reducing again his involvement in recent times.
“Jonathan is the figurehead, and his departure shall be symbolic”, stated Yearsley. “However the funding calls have been led by Henry Maxey for greater than a decade”.
Ruffer has adjusted its funding technique in response to the run of poor efficiency, altering its mixture of so-called ‘progress’ belongings — these which are geared for larger returns.
The change has helped gasoline its Whole Return fund’s 3.8 per cent acquire to this point in 2025; 4.8 per cent over the 12 months to the top of February. The Financial institution of England’s base fee is presently 4.5 per cent.
Ruffer’s managers stay optimistic. The agency stated that the chance from its present funding positioning “is one of the best we’ve seen for a number of years”.
There was “enormous” potential “in extremely engaging belongings buying and selling at depressed costs on account of pervasive religion in US exceptionalism which we expect is operating out of highway”, it added.
Even the previous investor believes Ruffer’s technique might regain its shine, though it would require persistence.
“When the market subsequent crashes — particularly large-cap US — then Ruffer will most likely have their second within the solar.”
