The managers of the long-established £480m Ruffer investment trust sold some of their holdings in gold, but made an investment in bitcoin in November.
The managers of the trust have long been positioned for a sharp rise in inflation, something which paid off in the second half of 2020 as markets began to price in a swift and steep economic recovery, pushing up the gold price and also benefiting the types of value equities in which Ruffer is invested.
In his annual update to shareholders in the trust, joint manager Duncan MacInnes, wrote: “What most people will find surprising about 2020 is that through a severe global recession, most assets ended up making money.
"This is hard to reconcile with the lived experience of 2020. Despite the rise in asset prices, the portfolio objective of preserving shareholder capital was thoroughly tested as we experienced the broadest possible range of market and economic environments.
"One notable addition to the portfolio during November was bitcoin exposure. We have a history of using unconventional protections in our portfolio. This is another example, a small allocation to an idiosyncratic asset class which we think brings something significantly different to the portfolio."
He said due to zero interest rates the investment world was "desperate" for new safe-havens and uncorrelated assets.
"We think we are relatively early to this, at the foothills of a long trend of institutional adoption and financialisation of bitcoin."
He added: "Think of bitcoin’s bad reputation as a risk premium – as we move through the process of normalisation, regulation, and institutionalisation, the compression of this premium can have a dramatic effect on the price.
"If we are wrong, bitcoin will return to the shadows and we will lose money – this explains why we have kept the position size small but meaningful.”
Bitcoin’s price has fluctuated sharply in recent months, but at present is far higher than it was in November, when Ruffer invested. It is presently around £25,0000, having been £11,000 in November.
FTAdviser recently reported that most advisers will be steering clear of bitcoin regardless, however.
In addition to buying more bitcoin, Ruffer increased its equity holdings to around 40 per cent, having previously been 30 per cent.
The Ruffer investment trust had a strong year in 2020, returning 17 per cent, while the average trust in the AIC Flexible Investment sector lost one per cent.
Over the past five years, Ruffer has returned 35 per cent, while the sector returned 38 per cent.
david.thorpe@ft.com
