Monthly Investment Report - April 2019
RUFFER INVESTMENT COMPANY LIMITED
(a closed-ended investment company incorporated in Guernsey with registration number 41996)
LEI 21380068AHZKY7MKNO47
Attached is a link to the Investment Monthly Report for April 2019.
http://www.rns-pdf.londonstockexchange.com/rns/4175Y_1-2019-5-8.pdf
During April, the net asset value of the Company rose by 0.7%. This compares with a rise of 2.7% in the FTSE All-Share index.
Within the portfolio, positive contributions came from our equities, which outperformed the market, but gains were tempered by our defensive assets with index-linked bonds, gold and unconventional protections all down. Does it feel like we have been here before? In testament to the extreme brevity of financial memory, after two near-calamities in February and December of 2018, investors have been persuaded the environment is ripe for risk-taking and stock markets have pushed back towards all-time highs.
As we discussed last month, the volte-face from the Federal Reserve on interest rates may have materially changed things in the short run. We see their actions as a promise, not just to refrain from taking away the punch bowl, but also to proactively encourage investors to party a little harder. Additionally, it is plausible that good news on US/China trade relations or Brexit could give further impetus to the rally. Lastly, the political debate in the US is gravitating towards highly stimulative policies such as modern monetary theory and job guarantee schemes. In response, we have let our equity weighting drift up to above 40% whilst the sun is shining.
This environment has buoyed risk taking and encouraged complacency: volatility selling is back, credit spreads have been crushed, currency markets are somnambulant and $10 trillion of bonds trade on negative yields. The equities which are working are the ones playing the games which define this particular cycle: the FANGs (Facebook, Amazon, Netflix, Google), technology and those favouring corporate finance solutions such as buybacks or acquisitions over capital expenditure and investment. In a sign of the times, we are seeing a flurry of tech unicorns come to market - Uber, Lyft, WeWork, Airbnb, Pinterest and more. These businesses are ubiquitous and some have even reached the status of verbs, yet the simple concept of a profit eludes them. In a world where growth is scarce, the hope of any growth draws in capital, irrespective of its quality.
Our largest equity holding is Walt Disney, which rose 23% over the course of the month (adding 0.6%) after a highly publicised investor day. Disney is the world's largest media company and seeks to monetise its characters and unrivalled content library through movies, consumer products and theme parks. The acquisition of 21st Century Fox broadens and deepens this unique pool of intellectual property. The newly announced direct to consumer streaming service, Disney+, looks like a competitor to Netflix, but on a fraction of the valuation. As investors start to use their imagination and consider how big, profitable and advantageous Disney+ might become, we expect the stock to continue to do well.
Enquiries:
Praxis Fund Services Limited
Shona Darling
DDI: +44(0)1481 755528
Email: ric@praxisifm.com
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