Ruffer Investment Company Limited Monthly Investment Report - July 2023 (8630I)
10 Agosto 2023 - 3:00AM
UK Regulatory
TIDMRICA
RNS Number : 8630I
Ruffer Investment Company Limited
10 August 2023
RUFFER INVESTMENT COMPANY LIMITED
(a closed-ended investment company incorporated in Guernsey with
registration number 41996)
LEI 21380068AHZKY7MKNO47
Attached is a link to the Monthly Investment Report for July
2023.
http://www.rns-pdf.londonstockexchange.com/rns/8630I_1-2023-8-9.pdf
The Federal Reserve, the IMF, the Bank of England and Goldman
Sachs amongst others have moved their forecasts to suggest a soft
landing, or no landing, is the most likely outcome for the global
economy. A new, rosier narrative has emerged: that a recession will
be avoided, and immaculate disinflation has been achieved
vindicating market bulls and central bankers alike. The Nasdaq is
up 37% year to date, performance to rival the dot.com boom.
This looks to us like a prime example of price action driving
the narrative. Markets think a recession can be avoided because
markets are going up. However, economic fundamentals continue to
weaken with a reduced availability of credit, visible cracks in a
previously strong labour market, and other key leading indicators
such as manufacturing survey data are now in recessionary
territory. Meanwhile, monetary conditions continue to tighten as
global central banks raise rates and quantitative tightening (QT)
continues apace. We believe that both the economy and financial
ecosystem are conditioned to low interest rates and are incapable
of enduring interest rates in excess of 5%.
At the same time, real yields are dramatically increasing - now
as high as 3% on two year US inflation protected bonds. We have
previously focused on the speed at which real yields have risen, as
a guide to market fragility. This year real yields have risen
slowly, but inexorably, and we think the second half of 2023 will
be about discovering where the biting point is. If history is our
guide, it is close.
In July, the rise in global real yields hurt inflation linked
bonds. The mix of derivative protections were also a small drag.
These were more than offset by our oil exposure, the biggest
risk-on asset in the portfolio, which rose 14% in the month in
response to further OPEC supply cuts.
On the penultimate day of the month the Bank of Japan ended
their yield curve control policy. The news was met with a pop
rather than a bang - the yen didn't move much. However, that pop
was the starting pistol for something bigger. We have considerable
exposure to the yen, directly and via derivatives, and believe
these positions have a long way to run. The end of extreme monetary
policy divergence, forcing all weakness through the currency,
should see a material strengthening in the yen. Japanese government
bond yields floating higher may be the final anchor to slip loose
on global duration, which will have ripples across other capital
markets.
The surge in risk appetite from the presumed economic 'all
clear' has allowed credit spreads to tighten, equity market puts
have become cheaper still, and equity volatility (measured by the
VIX) has now fallen back to pre-covid levels. Having cost the
portfolio year to date, these protections are now highly attractive
and, usually, tend to be most advantageous when nobody wants
them.
The overarching message to our investors is that we have been
here before, and that feeling uncomfortable is sometimes necessary
for differentiated results. We retain a high level of conviction
that the portfolio is correctly positioned given the environment we
see and hope to deliver on the patience and faith shown in us by
our investors this year.
Enquiries:
Sanne Fund Services (Guernsey) Limited
Jamie Dodd
Email: RIC@apexfs.group
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