Fund Spotlight: a port in a storm for cautious investors

Heightened volatility in 2025 across equities, currencies and commodity markets as well as gyrating yield curves across fixed income made navigating the investment landscape tough.

Geopolitical and fiscal uncertainty across developed and emerging countries has met with a degree of concern regarding the immense capital expenditure being funnelled towards AI-related infrastructure/projects among some of the world’s pre-eminent listed companies.

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While these companies’ earnings have been impressive, this immense inward investment has implications not just within equity markets but through credit markets, given some of this is increasingly being funded by bond issuances rather than cash flow.

It's an environment that has led some more cautious investors to consider an allocation to total return or wealth preservation strategies.

One such strategy that is popular with our investors is the Ruffer Investment Company (LSE:RICA), an investment trust that focuses heavily on wealth preservation, aiming to consistently generate positive returns (twice that of the Bank of England base rate) irrespective of market conditions by investing in a range of asset classes.

The trust’s popularity is in part explained by a decent record of providing strong relative performance in periods of market drawdown or crisis, making it an attractive all-weather strategy for the more risk-averse investor.

What does the fund invest in?

The trust is multi-asset in nature, having the flexibility to allocate across a range of asset classes, including equities, conventional and inflation-linked bonds, currencies, precious metals and commodities as well as derivatives.

The managers, Jasmine Yeo, Ian Rees and Alexander Chartres, are charged with implementing the overarching investment strategy and asset allocation of Ruffer.

The focus is on both protecting wealth from market downturns as well as generating positive returns over the long run.

Therefore, the portfolio houses both “growth” and “protection” assets at any one time. Given the unlikelihood of accurately predicting the top and bottom of a given market cycle, a balance between these two buckets of assets is maintained and adjusted depending on Ruffer’s outlook on market conditions.

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The current allocation comprises 37% and just over 10% in short-dated and long-dated nominal bonds (with a near 6% allocation also to index-linked bonds).

Roughly 29% is equities, which are either held directly or via exchange-traded funds (ETFs), favouring consumer discretionary, financials and industrials sectors.

Around 5% is held in gold/precious metals and just under 10% is held in credit and derivative strategies – an example of this being equity index puts, which yielded profits (and were therefore trimmed) as markets fell sharply following the tariff-induced sell-off in the first half of 2025.

The managers also actively manage currency exposure which, while predominantly sterling (around 75%) also allocates to the Japanese yen (11.3%) – given its safe-haven status and the potential for a reversal of the Japan carry trade – as well as a recently increased holding in US dollars (5.7%), which the managers think could be supported by an acceleration of US growth.

The portfolio’s careful construction is intended to account for any feasible market scenario.

For example, the equity portion of the portfolio is expected to perform well in an environment in which economic growth continues to deliver while inflation moderates – often considered a Goldilocks scenario.

Meanwhile, assets such as commodities and inflation-linked bonds ought to justify their place should developed markets suffer a resurgence of policy or supply-induced inflation, whereas in the instance of a slowdown in global growth and decaying employment, derivative protections and short-dated bonds may protect returns for investors.

How has the fund performed?

In spite of the trust’s cautious approach, recent returns have been very strong, having generated a net asset value (NAV) return of 10.9% throughout 2025 (and a share price total return of over 12%) as the trust’s allocation to precious metals and miners in particular proved lucrative - inducing some profit taking – and helped by a strong showing from the equity portfolio.

Over the longer term, the trust has shown resilience in periods of market strife, generating positive returns, for example, in 2020 (the Covid-19 pandemic) and 2022 (the invasion of Ukraine), but struggled greatly in 2023 with a disappointing negative return owing partly to the credit protection and index puts, which detracted in what was a surprisingly buoyant market environment given the backdrop of continued conflict and persistent inflation.

Still, years of negative returns are a relative rarity for the trust, having experienced just two in the past decade and having consistently achieved its target of generating a return twice that of the Bank of England lending rate.

Source: Morningstar Total Return (GBP) to 31/01/2026. BoE base rate x 2. Past performance is not a guide to future performance.

Why are we highlighting this fund?

Ruffer has a strong pedigree in the realm of capital preservation and absolute return investing and follows a coherent philosophy of first avoiding loss and second growing capital.

The Ruffer Investment Company is a sizeable (£885 million), FTSE 250-listed iteration of Ruffer’s flexible but cautious approach to asset allocation and investment selection, which has typically succeeded in defending investors from drawdowns while still providing growth over the long term.

Compared with its two closest closed-ended competitors, Capital Gearing Ord (LSE:CGT) and the larger Personal Assets Ord (LSE:PNL) trust, Ruffer makes more active use of derivatives in its investment process and has typically exhibited a degree more volatility – although all three, of course, have achieved a good sight less volatility than a typical equity index.

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The trust has generally managed to avoid its shares trading at a substantial discount to its NAV, being able to buy back shares to counter the effects of lesser demand on the share price when necessary.

Those investors with a preference for open-ended funds may also consider the £1.5 billion WS Ruffer Diversified Return I GBP Acc fund which, while not identical, shares managers with the trust and expresses the same core Ruffer philosophy as the Ruffer Investment Company.

Note: Ruffer Investment Company does not form part of ii’s Super 60 or ACE 40 rated lists.

The fund’s instrument page can be viewed here.