TIDMRCP
RIT Capital Partners PLC
01 August 2023
RIT Capital Partners (RCP)
01/08/2023
Results analysis from Kepler Trust Intelligence
Over the six months to 30/06/2023, RIT Capital Partners' (RCP)
NAV per share total return (including dividends) was broadly
unchanged at -0.2%. This compares to the MSCI ACWI (50% GBP) which
was up 11.0% and CPI plus 3% at 5.5%. Excluding a handful of the
largest technology companies, the remaining stocks in the S&P
500 averaged more modest returns. The FTSE 250 (of which RCP shares
are a constituent) declined by nearly 1%.
RCP's in-house management team (J Rothschild Capital Management)
maintained a relatively low quoted equity exposure over the period.
They also deliberately had little exposure to publicly listed
technology stocks, given this sector is well-represented in the
private investment portfolio. Despite this, the quoted equity
portfolio performed well, helped by some strong stock picks, as
well as healthcare and Japan exposures. Private investments were
down slightly for the half year. The largest detractor over the six
months was currency, driven in large part by Sterling's 5.1%
appreciation.
Over the six months, the discount to NAV at which RCP shares
trade widened by 10 percentage points to 21%. A total dividend for
2023 of 38 pence per share has been declared, an increase of almost
3% from 2022.
Kepler View
Context is everything. So whilst RIT Capital Partners' (RCP) NAV
performance over the first half of 2023 may have lagged rising
equity markets, it is worth remembering that RCP has been
cautiously positioned with respect to equity markets, both by
having a relatively low net equity exposure, and within this by
having a relatively defensive underlying equity exposure.
The low exposure to quoted technology businesses (which have led
equity markets) is a result of the manager's conscious decision to
gain exposure to their digital transition theme within private
markets. RCP's managers highlight that stripping out the few
megacap technology stocks from the S&P 500, the remaining
stocks averaged a return of around 6% over the six months to
30/06/2023. By comparison the quoted equity book rose by almost 7%
in the first half, an entirely acceptable performance.
RCP aims to deliver long-term capital growth, while preserving
shareholders' capital. It achieves this through diversification
across a broad spread of asset types, as well as active risk
management by the in-house management team, which aims to shield
the portfolio from specific risks. Private investments make up the
largest individual segment of the portfolio. It is this section of
the portfolio that powered the strong performance of the trust
relative to equity markets during 2020 and 2021, but contributed to
negative returns during 2022, and has marginally detracted so far
in 2023. A consequence of the strong organic performance is that
private investments now represent c. 40% of NAV, a figure we would
expect to trend downwards over time as the portfolio naturally
rebalances.
The managers do not yet see grounds for increasing their overall
exposure to equity markets, but continue to focus on specific
themes, such as healthcare, digital transition and Japan. We
welcome the promotion of Nick Khuu as co-CIO, which illustrates the
strength and depth of the talent on the investment team. RCP is set
up for, and has historically dealt well with, challenging periods
for equity markets such as the period we currently face. The board
report that they are confident that the in-house management team
will continue to find attractive opportunities to invest RCP's
capital, but also see the current discount as a compelling
investment for shareholders, as is evidenced by continuing
buybacks.
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NRAFIFVATEILIIV
(END) Dow Jones Newswires
August 01, 2023 05:37 ET (09:37 GMT)
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