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Jonathan Ruffer: Brexit deal doesn't matter in long run

Jonathan Ruffer: Brexit deal doesn't matter in long run

Jonathan Ruffer is not fretting over the UK's Brexit deal as his firm focuses what will hopefully prove to be a more prosperous 2018 for its clients.  

Last year was not the best for the fundamentally cautious approach employed by fund firm, which purchased £120 million in Vix options as volatility protection in April, at one pointing owing almost 10% of contracts in the market.

The fear of a market meltdown did not materialise as risk assets motored on however, rendering the protection Ruffer employed across it portfolios largely immaterial. 

This was reflected in the 2.1% rise by the Ruffer Investment Company versus the FTSE World index's 11.7% increase. 

In his review of the year, Ruffer founder Jonathan Ruffer (pictured) stressed that while cautious in nature, his firm did not completely avoid risk in 2017. 

'Our investment portfolios have returned little in 2017, but this should not be taken to mean that the portfolios are without risk,' Ruffer wrote. 

'We always try to balance "greed" with fear, and our "greedy" equities are concentrated in those areas of the market which have favourable dynamics, without the overvaluation which invariably accompanies the allure of momentum.' 

This meant the firm avoided what Ruffer described as 'hairy monster' investments in his final update of 2017, where valuations had rocketed. These included equity market staples within the tobacco and food sectors. 

Overall, portfolios had a lowish 40% exposure to equities, with three main emphases: a bias to Japan (where it views banks as 'incredibly cheap'), special situations across the major economies and a high exposure to financials, specifically banks and insurance companies. 

The biggest conviction remained in index linkers, the majority of which was found in short-dated stock to protect against Ruffer's greatest fear - a surge in inflation. 

A dangerous world

There is a little chance of the firm drastically altering its cautious approach this year as its, although Ruffer stressed it will not go into hiding for the sake of it. 

'The world feels more dangerous, and very much more uncertain, than it has for many a decade. One needs to be aware of approaching danger, but not to be so fearful of this danger that one hides in a rabbit hole,' Ruffer said. 

'One of the requirements of managers of investment portfolios is to reflect the needs and aspirations of that status quo, but one can easily forget that one man’s poison is often another man’s meat.'


One thing that Ruffer believes is 'almost bound to happen' is the 'political collapse' of a united Europe. 

He added: 'The main board directors of Europa Plc are uncannily reminiscent of two sets of Russian leaders, whose autocracy, and tin–eared response to the realities, lost an empire in 1917 and 1989.

'Is it too soon to bet on this happening west of the Danube? Maybe, maybe not. The key is to understand the brittle nature of things.' 

Ruffer views the political response for Europe to weld together into a single voice, attitude and will 'is asking for trouble'. 

'It worked in the subjugation of Greece, it may or may not work in the outcome with Britain, with Spain, with Germany, with the next but one centre of crisis. It is essentially a call to those for whom the fear of another war is the mischief to be avoided,' he said. 

'The generation in whom this resonated most strongly are now retired, with the exception of the redoubtable Ken Clarke in England, but its echo is heard by many who are still at the zenith of their power. But it is a dying sigh.' 

According to Ruffer, in the long run at least, the implications of this mean the nature of the Brexit deal is not so crucial. 

'Yes, crashing out may cost us five years’ growth (or not: who knows?), but unless you are a citizen of the world, and in charge, that’s not a key thing, at least in economic terms,' he said.

'In investment terms, that means that we will have to guard against an extreme reaction in the currency and asset values from a bad Brexit; but if that’s what we get, it will make British assets, priced down accordingly, attractive in comparison to those on the continent.'

As his firm prepares for another year battling difficult conditions, Ruffer hopes 2018 proves to be a better one in terms of performance. 

'The future is always in a place that the guide books don’t cover, and where the phrase for "how much is the wine" is only a hair’s breadth away from an insulting reference to the father–in–law.

'There are two big questions for today’s investor – how long before the next chapter, and, secondly, what will that chapter bring? In the opening days of 2018, we hope for better figures than those we provided in 2017.'      

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