Contenders: 10 trusts in the flexible investment sector
WINNER: RIT CAPITAL PARTNERS
RIT Capital Partners wins this award with much the best net asset value (NAV) total returns in the new flexible investment sector.
They can be largely attributed to the 2012 decision of its chairman and major shareholder, Lord Rothschild, to stop worrying quite so much about safeguarding its NAV per share, and adopt a somewhat bolder investment policy.
Ron Tabbouche was brought in as investment director, equity exposure was raised from 51 to 61 per cent with new holdings focused mainly on the US and Japan, and the portfolio was concentrated into fewer holdings - although it remained widely diversified both geographically and in terms of both quoted and unquoted asset classes.
More recently, however, Rothschild and his team have adopted a more cautious approach.
Increasingly pessimistic central bank forecasts, anaemic global growth despite unprecedented monetary stimulus, and disappointing corporate results, mean that capital preservation is being given a renewed emphasis.
Exposure to equities and private equity has been cut to 43 and 26 per cent respectively.
'In today's difficult conditions we will put greater emphasis on creating value by searching out opportunities in dislocated credit situations, currency fluctuations and merger arbitrage,' Rothschild declares.
The trust is well placed to explore all sorts of options, thanks to its £2.8 billion of total assets, its willingness to subcontract funds to exceptional external managers and its range of strategic relations.
It has added to the latter by taking a stake in Eisler Capital, whose founder manager Ed Eisler 'focuses on global macro investment opportunities, targeting returns over the cycle, with capital preservation the focus'.
'There's an old saying that in difficult times the return of capital takes precedence over the return on capital,' Rothschild states. 'Our principle will therefore be to exercise caution in all things in the current year.'
HIGHLY COMMENDED: BACIT
Compared to its peers, BACIT has recorded above-average performance in each of the past three years. Launched in October 2012, it is a fund of long-only funds, hedge funds and other alternative investment funds.
All of the underlying holdings waive their management and performance fees in return for donating what is effectively BACIT's own management fee to cancer research and other charitable causes.
It targets NAV total returns of 10 to 15 per cent per annum, achieving annualised returns of 8.4 per cent.
Most hedge funds had a poor run over the six months to end January, as did the FTSE All-Share and MSCI World indices, but BACIT held its ground.
Chairman Jeremy Tigue notes that three of the 10 worst months for the FTSE All-Share index since October 2012 occurred in June, August and September 2015.
'The index was cumulatively down 32.7 per cent during those 10 (down) months, while BACIT's comparable decline was 5.3 per cent,' he points out.
BACIT's hedge fund exposure means it is difficult to understand what it is doing, so investors must take a lot on trust. Nonetheless, its ability to gain zero-cost exposure to its investee funds makes it an option for those wanting flexible, managed exposure to alternative investments.
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