235. Why investors need to rethink the way they build a portfolio

One day in September 2022 “we were the only active buyer of UK duration in the world” says manager Duncan MacInnes. He, and LF Ruffer Diversified Return co-manager Ian Rees, added to UK gilts three days after the Truss-Kwarteng debacle and some assets more than doubled in a short period of time. In this interview, the pair tell us about this and other investments that helped the fund become one of the few to manage a positive return in 2022. They also explain why they think the next decade will be very different to the last 40 years and will see inflation average 3-4% rather than the 2% we are used to, and why this means investors need to rethink the way that they build their portfolios.
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Managed by Duncan MacInnes and Ian Rees, the LF Ruffer Diversified Return fund aims not to lose any money on any 12-month rolling basis – with a specific focus on providing genuine portfolio protection in times of market stress. 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.

What’s covered in this episode:

  • How the fund produced positive returns in 2022
  • Why the pair were the only active buyers of UK gilts one day last September
  • The addition of commodities to the portfolio
  • Why the next 10 years will be different from the last 40
  • Why inflation will remain much higher than we have been used to
  • Why cash could once again be king
  • How they use 100 years of data to help for their views and asset allocation
  • How the managers will go about finding uncorrelated assets in 2023
  • Why inflation volatility and investing for inflation aren’t the same thing
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