Ruffer Investment Company added a position in Bitcoin to its portfolio as a “hedge to some of the monetary and market risks” that its management team sees in the post-Covid-19 market.
Ruffer Investment Company said that Bitcoin had been introduced to its portfolio through one it the specialist managers appointed within the Ruffer Multi-Strategies fund. The position accounts for around 2.5% of its portfolio.
In a statement, the managers said it was “primarily a defensive move”, made in November after the investment firm reduced its exposure to gold.
The managers said: “We see this as a small but potent insurance policy against the continuing devaluation of the world’s major currencies.
“Bitcoin diversifies the company’s (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see.”
Numis analyst Priyesh Parmar said that managers Hamish Baillie and Duncan MacInnes had “successfully employed unconventional sources of portfolio diversification to protect against downside risk” in the past, with the company having “an impressive record of insulating against market falls”.
Indeed, the trust’s net asset value increased 26% through 2008, versus a 30% drop in the FTSE All-Share.
Parmar noted the Bitcoin exposure was likely to “raise a few eyebrows”, but accepted it was “hard to question [the managers’] asset allocation decisions”, considering its past track record.
The analyst added that while the BTC price had continued to be volatile, crypto-currencies had matured, with an expected “tipping point” coming when they can be used more effectively on a transactional basis.
Parmar said: “The exposure for Ruffer fits with their outlook that the level of government debt and recent fiscal and monetary stimulus can only be addressed through financial repression and that it has created the risk of debasement of traditional currencies.
“We note that it remains are relatively modest positions at 2.5% of the portfolio and can understand the rationale of the managers seeking diversification at a time when the correlation of returns across asset classes is increasing.”
In the year-to-date, Ruffer has delivered share price gains of 12.9%, well ahead of the FTSE All-Share’s 9.9% loss and better than the MSCI World’s 12.6% return, per FE fundinfo.
Parmar said the fund was “an attractive portfolio diversifier, and is clearly offering differentiated exposure compared to many traditional portfolios”. Ruffer currently trades on a 1.7% discount to NAV.