This blog is quite different from what you are used to reading on here. It promotes a single asset manager with a single fund and I’ve written it, partly because Ruffer’s expansion into the US is in the news this morning, and partly because I have a deep conviction that they have an approach that the UK DC pensions market needs right now.
I last wrote such a piece 10 years ago when I discovered Terry Smith’s Fundsmith
Who is Ruffer?
Jonathan Ruffer is the genius of Ruffer as Terry Smith is to Fundsmith.
But though Jonathan Ruffer is the spirit of the company, he is not the company.
What is Ruffer?
A recent restructuring means the asset manager is run by its 56 partners, rather than its three co-founders — Jonathan Ruffer, Robert Shirley and Jane Tufnell.
This looks like a succession plan and a plan to succeed.
Ruffer is a very British success, an active fund manager which manages other people’s money and achieves what it sets out to do. It only has one fund but that fund is a winner.
This morning, the FT is running the news that Ruffer, after 28 years of getting it right, is about to open an office in New York.
What is Ruffer’s approach?
The approach that Ruffer takes to managing other people’s money can best be described as “unconstrained” – they just get on with it, taking opportunities as they come along in the style of a hedge fund – but without the high management fees that hedge funds have claimed are necessary for investors to pay.
“A hedge fund without the fees” is one characterization , but speaking with their investment team the word that you hear most is “liquidity”. Ruffer’s strategy anticipates that investors will face a liquidity crunch as interest rates remain high. Almost a third of the UK Ruffer’s portfolio is in inflation-linked bonds, including US and UK government debt, as well as gold.
“If there is a liquidity crunch, and people can’t sell private credit or corporate bonds, they’ll sell equities,” Jenny Renton, investment director at Ruffer told the FT.
She said the firm expected a recession in several big economies this year, including the US.
Necessarily, such an “unconstrained” approach will include controversial investments. Last year, famously, Ruffer took a position on Bitcoin, a position that paid off. It has no plans to repeat the strategy but is not embarrassed to talk about how it finds ways to get its way for investors.
Although Ruffer only runs one fund, it is expressed in five different ways, the one I am interested in is the daily dealt diversified return fund which you can read all about here.
Why we’re backing Ruffer
I have to declare an interest, AgeWage has analyzed the returns that those saving for their retirement get using the Ruffer investment approach and verified Ruffer’s claims that it’s sole investment fund consistently achieves high returns with low volatility, not just for the three years that the fund has been marketed to UK schemes but over a timescale that goes back to the start of the century.
The results of our analysis suggest that Ruffer is and has been delivering value for saver’s money for decades. I don’t see any point in sitting on the fence, we think British DC pension funds should buy Ruffer’s diversified return fund for their mature savers.
We see Ruffer’s approach as right for people like me who need real returns on our savings but are fearful that markets may put our drawdown strategies at risk.
For some time, we have been testing strategies of asset managers and we will continue to do so. There is a nascent market within occupational pension schemes and GPP providers for strategies that provide later life protection for mature savers and their maturing pots.
We think that having “Ruffer inside” a default offers savers comfort at a time of peak vulnerability. So we will be offering our analytics as an independent verification of Ruffer’s claim that it has “decoded the DC pre-retirement conundrum”.
9% annualized returns over 28 years
Over the past 28 years, Ruffer’s strategy has ridden out several bear markets , producing positive performance through thick and thin. It’s fund does not behave as others and this “low correlation” has offered genuine protection.
It is the good luck for the workplace pension market that we have on our doorsteps, an asset manager that has set out to defuse the destructive consequences of sequencing risk.
Get a British manager to manage British pension problems
It is still unfashionable to buy British, but there are good reasons to do so, not least that local companies understand local markets. Ruffer’s local market is the UK and it has set its site on becoming a major service provider to UK DC plans.
There’s is not a buy and hold approach. This is not “patient capital”, this is not a play to capture the illiquidity premium. It is quite the opposite. It is not competing with these accumulation strategies, it is complementing them.
Ruffer’s is an approach designed to avoid disappointment amongst those who have saved and now rely on their savings for financial security in retirement. They are likely to be the first generation to benefit from a new wave of retirement products designed to decumulate rather than accumulate our savings.
Rather than give this job to a global indexation managers such as BlackRock or State Street, I hope that the trustees, CIOs and platform managers of the large workplace pensions will buy British and get Ruffer inside their defaults.
Now is the time to buy Ruffer’s British asset management , as the Americans are showing.