All-weather investing

Seeking consistent positive returns.

Come rain or shine.

Ruffer provides investment management services for institutions, pension funds, charities, financial planners and individual investors.
All-weather investing
Select Location
UK
Europe
Australia
US
Asia
Middle East
Channel Islands
Rest of world
Type of Investor
Individual investors
Institutional
Charity
Family office
Financial planner
Individual investors
Institutional
Charity
Wholesale
Retail
Institutional
Institutional
Institutional
All investors
All investors
London
80 Victoria Street
London SW1E 5JL
Edinburgh
31 Charlotte Square
Edinburgh EH2 4ET
Paris
103 boulevard Haussmann
75008 Paris, France

DC pension schemes

Time to dance to a different tune?

James Fouracre
Director – UK Institutional

Achieving positive returns in a defined contribution (DC) investment portfolio, whatever happens in financial markets, means finding and owning assets which respond differently to changes in the investment environment. Crucially, it also means owning assets which respond differently to each other.

Whereas conventional bonds formerly protected clients against falls in equity markets, ankle-high interest rates have suppressed their protective power. We witnessed this recently in March 2020, September 2021, and April 2022, when equity and bond markets fell in tandem.

This year, other traditional ‘safe havens’ have also failed to provide the shelter DC investors might have expected. The yen has suffered even as equity markets sold off. And gold, despite inflation reaching 40 year highs, has been lacklustre.

All asset classes have been dancing to the same tune. And so far this year, it has been a dreary melody.

We’ve been wary of the absence of available offsets for some time. This led us to develop more creative protection strategies, and to invest in more unconventional assets.

In practice, this has meant incorporating derivative strategies into the portfolio. We seek protection that is both effective and attractively valued – instruments which offer convex pay offs.

All asset classes have been dancing to the same tune. And so far this year, it has been a dreary melody.

One example of this uncorrelated investment protection is our use of payer swaptions. We retain conviction in the power of inflation-linked bonds to retain value in an environment of financial repression. But these instruments rise materially only when there is a shift in inflation expectations – until then, the inflation-linked bonds carry significant interest-risk (as with conventional bonds). As central banks have embarked on their hiking cycle, payer swaptions have worked to offset the falls in fixed income and removed the need for us to perfectly time an exit, and re-entry, into the asset class.

Opportunistically, credit default swaps enable us to take tactical and targeted short positions within credit markets. As liquidity is sucked out of financial markets, these instruments provide a rare and unique means to make material returns in an environment in which the vast majority of assets could buckle under selling pressure.

At Ruffer, we have a strategy with the means and licence to invest in all corners of the investment universe. That means we can find uncorrelated assets, and ultimately, deliver uncorrelated returns.

Inflation: bad for portfolios, good for society?
As inflation has soared to its highest level for 40 years, financial markets have taken fright, with most bond and equity markets down significantly so far in 2022. In fact, the US is now officially in a bear market, and inflation pressures show few signs of fading – quite the contrary.
Read
Protecting capital
Protecting clients’ capital is the core of Ruffer’s investment approach. As the market landscape has evolved, so too have the strategies we use to achieve this objective. In this presentation we’ll look at historic examples of our protection strategies – what they were and how they were implemented. We’ll also discuss the risks we see in the current market environment and how we’re seeking to protect against these.
Read
Ruffer Review 2022
Download our 2022 edition of the Ruffer Review. We explore how turbulence lies ahead for investors as inflation volatility sets up to be the biggest challenge for investors in a generation. We also discuss risk and its repercussions, shifts in global politics and Great Power relations, a warming planet and shifting energy mix as well as financial disruption and regime changes.
Read

Sources: Ruffer, Bloomberg. Chart: Proportion of variation explained by first two principal components. 45 years of weekly data across US, UK, Germany, Japan and EM equities, dollar index, GBP, EUR, JPY, AUD, oil, gold, commodities index, US and UK 10y yields. Data to April 2022

The views expressed in this article are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument, including interests in any of Ruffer’s funds. The information contained in the article is fact based and does not constitute investment research, investment advice or a personal recommendation, and should not be used as the basis for any investment decision. References to specific securities are included for the purposes of illustration only and should not be construed as a recommendation to buy or sell these securities. This document does not take account of any potential investor’s investment objectives, particular needs or financial situation. This document reflects Ruffer’s opinions at the date of publication only, the opinions are subject to change without notice and Ruffer shall bear no responsibility for the opinions offered. Read the full disclaimer.

London
80 Victoria Street
London SW1E 5JL
Edinburgh
31 Charlotte Square
Edinburgh EH2 4ET
Paris
103 boulevard Haussmann
75008 Paris, France