‘Gold is a good de­fence against money print­ing’

The Daily Telegraph - Your Money - - INVESTING -

In­vestors are of­ten quick to talk about the cap­i­tal gains or in­come they have made, but many sim­ply want some­where to pre­serve their wealth through good times and bad. The Ruf­fer In­vest­ment Com­pany, one of The Tele­graph’s top 10 de­fen­sive funds, in­vests in a mix of as­sets with the aim of pro­vid­ing a pos­i­tive re­turn year on year. It was one of a select group of funds to make money through the fi­nan­cial cri­sis of 2008.

Here Hamish Bail­lie, who runs the £406m port­fo­lio, de­scribes how he safe­guards his clients’ money.

How is the port­fo­lio split?

We call the fund’s two core el­e­ments fear and greed: as­sets that of­fer pro­tec­tion in bad times and those that will make us money in pros­per­ous times.

On the greed side, around 41pc of the fund is cur­rently in stocks. We are flex­i­ble in the com­pa­nies we in­vest in, but have two strate­gies at play.

First, we like com­pa­nies that can tap into global growth and are rea­son­ably val­ued. At the mo­ment they are hard to find. How­ever, Ja­pan is one place we think peo­ple are un­der­es­ti­mat­ing in value or sim­ply don’t know much about. One Ja­panese stock we own is Mit­subishi Elec­tric, the elec­tron­ics firm. It does busi­ness all over the world, so it will do well if Amer­ica con­tin­ues to grow, for ex­am­ple. Oth­ers ex­am­ples would be cycli­cal stocks, cur­rently unloved, such as Cleve­land- Cliffs, the iron ore pro­ces­sor, or those sen­si­tive to the oil price.

Then there are growth op­por­tu­ni­ties such as Ocado. As a tra­di­tional gro­cer we would say it is ex­pen­sive, but if looked at as a tech­nol­ogy com­pany it is very good value. We also have po­si­tions in cy­ber se­cu­rity com­pa­nies such as Check Point and Sophos, where we see a mas­sive growth mar­ket.

This is a bit of a break from what we have done pre­vi­ously, where we have had suc­cess with big con­sis­tent

CV: Hamish Bail­lie

Mr Bail­lie joined Ruf­fer in 2002.

In 2009 he opened the com­pany’s Ed­in­burgh of­fice, which he now man­ages, and is a com­pany div­i­dend pay­ers such as John­son & John­son or Kraft Foods, the con­sumer goods giants.

Ruf­fer’s Hamish Bail­lie tells Harry Bren­nan about pre­serv­ing wealth in a world of fear and greed

And on the fear side?

Peo­ple across the board are strug­gling to find pro­tec­tive as­sets that pay. When in­ter­est rates are so low it’s hard to find stores of value for leaner years.

What we re­ally want as de­fen­sive in­vestors is an as­set that will go up in value if there is a cri­sis that af­fects the stock mar­ket. One of our big­gest moves of late has been to buy pro­tec­tion against real in­ter­est rates go­ing down. This is where in­fla­tion rises but cen­tral banks are not able to keep pace with an equal in­crease in in­ter­est rates. Our in­sur­ance against this is our po­si­tion in in­fla­tion-linked bonds is­sued by the Bri­tish and Amer­i­can gov­ern­ments.

What other de­fences are in place?

We have been mak­ing small in­creases to our gold ex­po­sure. Gold min­ing stocks, for ex­am­ple, have been hit hard by the neg­a­tive sen­ti­ment sur­round­ing emerg­ing mar­kets. The rea­son we in­vest in gold is that it is an as­set that can­not be cre­ated at will, un­like pa­per cur­ren­cies. It acts as a good s store of wealth in a world heav­ily laden with debt, where cen­tral banks are inj in­ject­ing new money into the econo econ­omy.

We also take a form of in­sur­ance on the po po­si­tions we hold via de­riv­a­tive con­tra con­tracts, mean­ing we can cut our losses if things go wrong. M Many peo­ple see this type of de de­riv­a­tive-based in­sur­ance as a an in­hibit­ing ex­pense and also a drag on per­for­mance in the good times. But for us, this means

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