WS Ruffer Diversified Return

An extension of the wider Ruffer Investment Strategy, the WS Ruffer Diversified Return fund is an absolute return vehicle which has the protection of investor capital at the heart of its process. The fund aims not to lose money on any 12-month rolling basis, with a strong emphasis on providing genuine protection in times of market stress. Asset allocation is the key driver of returns in the portfolio.

Previously LF Ruffer Diversified Return.

Our opinion

While the fund itself is relatively new, the wider Ruffer Investment Strategy, from which it is based upon, has proven itself to be successful for almost three decades. It fits the mould of what an absolute return fund should look to do – protect investor assets first and then grow the value of the fund, whilst retaining that focus on capital preservation in all market conditions. The vehicle is global and completely unconstrained, allowing the managers to invest across various asset classes, including equities, fixed income, currencies and derivatives – backed by a large desk of both macroeconomic and stock selection specialists. Ruffer are the first to describe their process as “dull” but it has delivered in numerous market conditions – making it a strong consideration for any investor with a reasonably high level of risk aversion.

Fund manager

The fund is managed by investment directors Duncan MacInnes and Ian Rees, both of whom joined the business back in 2012. Prior to joining Ruffer, Duncan worked at Barclays in Glasgow, London and Singapore having graduated from Glasgow University School of Law in 2007. In addition to managing this fund, Duncan is also co-manager of the Ruffer Investment Company trust.

Ian graduated from the University of Bath with an honours degree in Economics. He previously worked in Ruffer’s Hong Kong office as an equity analyst covering emerging markets.

Investors love making money, but they hate losing it more.

Duncan MacInnesFund manager

Investment process

The purpose behind this launch was to respond to a growing number of investors who wanted access to the Ruffer Investment Strategy, but required greater liquidity and daily dealing (allowing the investor to invest cash today and withdraw cash any day thereafter). The existing strategy dealt on a weekly basis, so this product was launched with some slight adjustments (such as not holding Ruffer’s own multi-strategy funds) to provide a more liquid investment vehicle.

Beyond this, the investment process is unchanged, with managing the risk of losing money at the heart of the process. The fund aims not to lose any money on any 12-month rolling basis, with a strong emphasis on providing genuine protection in times of market stress by investing across equities, bonds, derivatives and currencies.

The investment process is split into three stages. The first is asset allocation, which is seen as the principal driver of returns. This is ultimately decided by chairman and founder Jonathan Ruffer and chief investment officer Henry Maxey, although other senior managers and members of the research team are involved in the process. The decisions made are designed to identify the prevailing risks and opportunities and build a portfolio of both protective and growth assets. The meeting takes place at the start of each week, although ad-hoc meetings can take place if market events dictate. The final views are then communicated to the entire business.

The second stage is fundamental analysis – which involves the 30-strong research team covering both macro-economic and company-focused security selection. Within that stage you could have standalone, stock ideas (undervalued securities), but you also have ideas which are very much driven by the prevailing macro factors of the economy (such as growth, employment, taxation, interest rates)

Although stock selection is mainly qualitative - the team does undertake equity screening but this will not dictate decisions.

The third stage is portfolio construction, which brings together the investment strategy and the identified securities in the first two respective stages. The final portfolio will consist of between 60-80 equities and 15-20 bonds, although it is important to note the fund is completely unconstrained in its allocation.

Derivatives are used purely to protect the fund from any vulnerabilities rather than making money from them.

In-depth research is conducted by a specialist ESG team in conjunction with research analysts to determine material risks and opportunities.

ESG

ESG - Integrated  

Ruffer integrates ESG throughout its process and believes that stewardship is an effective tool to enhance returns. The firm is a signatory to numerous initiatives including the Principles for Responsible Investment; climate change initiatives including Climate Action 100+; stewardship codes in the UK and Japan; and the taskforce on climate-related financial disclosure. The firm also uses data from MSCI ESG Research.

As a result, ESG is integrated throughout this fund. In-depth research is conducted by the specialist ESG team in conjunction with research analysts to determine material risks and opportunities. The team will regularly engage with stakeholders across numerous industry issues including policymakers, NGOs (Non-Governmental Organisations) and think tanks.

Risk

Ruffer describes the investment style as being like “riding a tractor on the motorway, plodding in the slow lane.” This fund will lag if markets are performing strongly, but it will perform when markets become more volatile/uncertain.

The business also has a team which looks at value at risk and modelling – however, the managers do not rely on these correlations to drive future assumptions. Ruffer takes risk management a step further by constantly looking for the “Achilles heel” of the portfolio – for example, the team will look at the previous 100 years of financial data and will run the portfolio against that historical data to see what environment would have resulted in a loss of money (drawdown).

The team will also adjust its investment assumptions to evaluate the impact on the portfolio. For example, what if the correlation between bonds and equities changes (negatively or positively) and how much additional stress it brings upon the portfolio.

Investors should be aware that while the fund has a defensive footing, it does not guarantee the protection of capital in any scenario in the future.

See more

Read more about this fund

The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.