Lord Rothschild buys gold and sells shares

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Lord Rothschild, chairman of RIT Capital Partners, is pessimistic on the outlook for financial markets and has moved to reduce the trust's exposure to quoted equities from 55 per cent to 44 per cent since the start of the year.

Some of the proceeds have been used to buy gold and other precious metals, which at the end of June accounted for 8 per cent of the £2.8 billion portfolio.

In the trust's half-year results, released yesterday, Rothschild remarks that 'we are in uncharted waters' due to 'central bankers continuing what is surely the greatest experiment in monetary policy in the history of the world'.

Rothschild said to date quantitative easing has successfully driven stock markets higher, but he fears this cannot go on forever. He adds that a number of headwinds could also derail markets.

BEARISH OUTLOOK

'Many of the risks which I underlined in my 2015 statement remain; indeed the geopolitical situation has deteriorated with the UK having voted to leave the European Union; the presidential election in the US in November is likely to be unusually fraught; while the situation in China remains opaque and the slowing down of economic growth will surely lead to problems,' said Rothschild.

'Conflict in the Middle East continues and is unlikely to be resolved for many years. We have already felt the consequences of this in France, Germany and the US in terrorist attacks.'

Other investors share Rothschild's bearish outlook, and similarly invest in an extremely cautious manner. These funds invest on the principle that they would sooner keep £1 rather than risk losing it to try and win £2.

The trade-off, however, is that in rising markets these funds will lag both the stock market and many of their sector rivals.

WEALTH PRESERVATION FUND IDEAS

Jason Hollands, of Tilney Bestinvest, says: 'Leading firms in this space are Ruffer (which runs Ruffer investment company) and Troy Asset Management, which manages both investment companies and open-ended funds with such mandates.

'I like Personal Assets investment trust, managed by Sebastian Lyon at Troy Asset Management. The portfolio invests across developed market equities, index-linked bonds, gold and cash.

'This fund is positioned for bearish times, with 22 per cent in cash or near-cash instruments and over 10 per cent in gold bullion.'

There are also a couple of absolute return funds that are worthy of the wealth preservation tag, including Henderson UK Absolute Return and Threadneedle UK Absolute Alpha.

Another that is well regarded is Newton Real Return. These funds aim to produce positive returns in all market conditions, but many of its peers have struggled to achieve their ambition.

Money Observer Rated Funds that adopt a low-risk multi-asset approach, include Premier Defensive Growth, JPMorgan Cautious Managed and Kames Ethical Cautious Managed.


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