Fund boutique Ruffer has always prided itself on making investments that go against the herd, boldly marketing its approach as “deliberately different”.
But its contrarian stance has left the investment house delivering such poor returns over the past two years that even cash has performed better.
At the heart of Ruffer’s thesis was the conviction that the all mighty US stock market was braced for a crash.
That call — one which is still at odds with the view of 70 per cent of fund managers in Bank of America’s latest survey — has proved wrong.
The US dodged a recession despite runaway inflation and the rapid interest rate rises of 2022 and 2023 aimed at choking it off. Despite concerns about frothy tech valuations, the US equity market has been resilient.
In 2023, as the S&P 500 delivered returns of more than 20 per cent, Ruffer’s Total Return fund lost 6.3 per cent. The Ruffer fund followed that performance up with a 1.8 per cent decline the year after.
Co-founder Jonathan Ruffer, the firm’s chair and a multi-millionaire philanthropist, remains adamant the company’s bearish investment strategy will be vindicated.
“It is not by accident that we still have a portfolio which can take full advantage of a system shock of some magnitude,” he said in the firm’s investment review in January.
The problem, though, is that Ruffer sells itself as an “absolute return” fund.
Set up in 1994 by Ruffer, Robert Shirley, the 14th Earl Ferrers, and Jane Tufnell, now chair of ICG Enterprise Trust, the firm has gained a reputation for serving the well-heeled and now runs some £19.5bn across nine funds, including its flagship £1.7bn Total Return product.
Its aim is to preserve investors’ money, even during periods of market turbulence, and beat returns on cash. Even if Ruffer’s view of the US is wrong, its investment strategy should still deliver positive results.
In the years in which Ruffer’s Total Return fund lost 6.3 per cent and 1.8 per cent, the Bank of England’s base rate averaged 4.7 per cent and 5.1 per cent respectively.
Ruffer’s long record has proven its ability to weather financial storms.
The firm cemented its reputation as a preserver of wealth during the bursting of the dotcom bubble at the turn of the millennium, when it returned 16.8 per cent in 2000 even as the stock market crashed.
Ruffer again delivered 16 per cent in 2008 during the global financial crisis, and 16.7 per cent in 2020 during the Covid pandemic. Since 1995, the year after Ruffer’s founding, its main strategy has delivered 8 per cent a year on average after fees.
But the recent weak performance has left investors and advisers questioning whether Ruffer has lost its shine, despite the co-founder’s optimism.
“Ruffer positioned itself as a boutique for the discerning investor, with a slight air of snobbery about them,” said Ben Yearsley, a managing director of consultancy Fairview.
“But as a ‘super bear’ they’ve had a very tough two years. They got the top-down macroeconomic call on the US economy wrong.”
Macroeconomic calls are made by a duo: Henry Maxey, who became chief investment officer in 2010, and Neil McLeish, named co-chief investment officer in 2023.
They set the investment process — one of the consequences of a gradual shift since 2010 away from the boutique’s trio of co-founders — which fund managers are then expected to implement with minor variations across the firm’s funds.
As Ruffer expects inflation to remain high and interest rates to be more volatile, its funds hold sizeable positions in gold and long-dated, inflation-linked bonds as protection. More than a tenth of the Total Return fund is held in cash. Derivatives, including credit default swaps, are used as another form of protection.
But that defensive positioning has not succeeded in shielding the firm from losses. Ruffer Investment Company, the firm’s trust, said in an annual report that 2023 was “the worst” in the history of Ruffer.
Peter Sleep, a fund manager at Callanish who backed Ruffer when he was at Seven Investment Management, said he had “seen a run of flat performance before” but noted that “2023 was unexpectedly poor given its disclosed holdings of cash, short term bonds, and equities”.
Some investors are voting with their feet. Seven Investment Management, which manages £27bn, told the Financial Times that it was pulling out the £1.1mn it had invested with Ruffer Total Return.
“We believe there are multiple internal and external factors that have made it an increasingly challenging environment for Ruffer and ultimately led to them missing their key objectives,” said Asim Qadri, investment manager at Seven.
Ruffer’s difficulties extend beyond poor performance.
The group has cut nearly a tenth of its workforce, amounting to more than 30 roles, over the past two years, something the firm said was the consequence of decisions to “prioritise investment on the needs of our clients and our growth ambitions in the UK and internationally” with “fewer and different roles” required in some part of the firm.
Duncan MacInnes, one of its top fund managers, abruptly departed in mid-February in a move that a person close to the company said was unrelated to the wider job cuts.
Separately, the firm has had to navigate ties to Crispin Odey, one of the firm’s original investors, who the FT reported in 2023 was facing allegations of sexual harassment, which Odey strenuously denies.
Ruffer moved to sever ties with Odey by changing the controlling entity of Ruffer LLP and Ruffer confirmed that there has since been no connection between Odey and the running of, or oversight of, Ruffer LLP — although some of Crispin Odey’s family still benefit from the investment.
One former Ruffer investor who sold their stake in Ruffer following reports of the allegations against Crispin Odey said that since then, “performance has been poor, fees are high . . . Frankly, cash or gilts are better options”. Ruffer declined to comment.
And Ruffer is also preparing for the retirement of its chair, Jonathan Ruffer, who has been cutting back his involvement in recent years.
“Jonathan is the figurehead, and his departure will be symbolic”, said Yearsley. “But the investment calls have been led by Henry Maxey for more than a decade”.
Ruffer has adjusted its investment strategy in response to the run of poor performance, changing its mix of so-called ‘growth’ assets — those that are geared for higher returns.
The change has helped fuel its Total Return fund’s 3.8 per cent gain so far in 2025; 4.8 per cent over the 12 months to the end of February. The Bank of England’s base rate is currently 4.5 per cent.
Ruffer’s managers remain optimistic. The firm said that the opportunity from its current investment positioning “is the best we have seen for several years”.
There was “huge” potential “in highly attractive assets trading at depressed prices due to pervasive faith in US exceptionalism which we think is running out of road”, it added.
Even the former investor believes Ruffer’s strategy could regain its shine, although it might require patience.
“When the market next crashes — especially large-cap US — then Ruffer will probably have their moment in the sun.”
https://www.ft.com/content/9e13958f-f990-45f2-9d14-81debf687812
