Yahoo Finance Questor: Bitcoin gave this trust a boost – either way it remains an ideal inflation-buster
For a conservatively run trust, Ruffer Investment Company caught fire last year. After a relatively mild fall to 209p in the coronavirus sell-off of February and March it staged a very quick recovery that has kept going all the way to last night’s close of 291p.
In fact the shares gained more between March last year and today – 82p or 39pc – than they did in the 10 years to the eve of the sell-off in February last year (about 40p or 22pc).
Some of this spectacular recent performance can be attributed to its well-timed and well-publicised investment in Bitcoin, the digital currency. The trust allocated about 2pc of its assets to Bitcoin in November when the price stood at about $15,000 (£11,000) and progressively sold as the virtual currency soared to a peak of $63,500. It sold out completely last month.
This brilliant purchase is almost incidental to the trust’s credentials, however. It exists to preserve its investors’ capital in real terms and it has always chosen its mix of assets with more than one eye on what it has long seen as the inevitable return of inflation.
That view, for a long time deeply unfashionable, is now mainstream – with good reason in this column’s view. All that has changed is that the trust no longer sees Bitcoin as a source of inflation protection at its currently elevated price (even if it has fallen sharply since the fund sold the last of its holdings).
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Instead, its managers have fallen back on their long-term favourites in that regard, namely gold (7.9pc of the portfolio at the end of last month) and index-linked government bonds (12.1pc).
We will have more to say on the latter assets when we look at our own anti-inflation portfolio tomorrow, but Questor is convinced that Ruffer Investment Company will perform well if and when inflation returns in earnest.
Now, as the consumer prices index shows signs of stirring back into life, would be a terrible time to sell this trust. Hold on.
Questor says: hold
Ticker: RICA
Share price at close: 291p
Update: City Merchants High Yield/Invesco Enhanced Income
Three years ago we advised readers to switch from Invesco Enhanced Income to City Merchants High Yield because of a spat between the board and managers of the former. We needn’t have bothered: not only was the disagreement quickly resolved but the two trusts – each managed throughout by Invesco – have now merged.
The combined portfolio has a new name, Invesco Bond Income Plus, and a new “ticker”, BIPS. Formally it is City Merchants rather than Invesco Enhanced because that fund was wound up and its assets transferred to its sister portfolio.
In many ways the merged fund is a compromise between its two predecessors. A key difference between them was Invesco Enhanced’s much higher gearing (20.7pc just before it was wound up, compared with City Merchants’ 3.1pc), which was part of the reason for its higher yield (6.8pc against 5.2pc). The combined trust has gearing of 6pc and yields 5.3pc.
It hopes to raise its dividend from 10p to 11p over the next three years. The manager is Rhys Davies, who ran both portfolios before their merger.
One of the benefits of the merger is a fall in costs: Invesco’s annual fee will fall from 0.76pc in the case of Invesco Enhanced and 0.75pc for the old City Merchants to 0.65pc for the combined fund.
The merged trust has not shed the discount of its predecessors, however: at last night’s close its discount was 3.1pc, compared with 1.6pc for Invesco Enhanced and 2.2pc for City Merchants just before their merger.
Anyone who owned the old City Merchants in the form of certificates should hang on to them; they remain valid and no new ones will be issued. The trust is a hold.
Questor says: hold
Ticker: BIPS
Share price at close: 189.25p
Investment trust news
In yesterday’s column we bemoaned the readiness of listed companies to “split” their shares and the consequent confusion often caused for private investors. Investment trusts are, of course, listed companies too and they also split their shares on occasion.
Allianz Technology, tipped here in July last year, carried out such a split on May 4 at a ratio of 10:1, so readers who see the share price at a 10th of its former level need not be alarmed.
Read the latest Questor column on telegraph.co.uk every Sunday, Tuesday, Wednesday, Thursday and Friday from 5am.
