‘We bought Bitcoin and made $750m in a month’ Markets Hub

Duncan MacInnes, who runs Ruffer’s ‘all-weather’ fund, tells Harry Brennan why Bitcoin’s time has come and why Disney is a ‘tax on parenthood’

It was one of the few funds to make money during the financial crisis. In fact, the £484m Ruffer Investment Company has made a profit for investors through each of the past three major market crashes and has posted annualised returns of 7.5pc since its launch.

Now it has bought Bitcoin, the volatile digital currency. Duncan MacInnes, one of the fund’s co-managers, talks for the first time about the controversial move and explains how the fund gained 23pc over the past 12 months while the FTSE All- Share index lost 6pc.

WHO IS THE FUND FOR? It is designed to be a one-stop shop for people looking to protect and grow their money in all weathers. A lot of our clients have 100pc of their investments with us.

HOW DOES IT WORK? We try to provide stable returns no matter the state of the economy. So we have very few limits on what we can invest in and where.

There are three big parts of the portfolio and none would work without the others – the three legs to our stool. They are inflation protection in the form of inflation-linked bonds, gold and Bitcoin, which make up around 40pc; global shares, which make up another 40pc; and 20pc in unconventional investments, which are basically market bets to protect against any big upsets that might occur.

WHAT SAVED YOU IN 2020? Two things: we bet that there would be more volatility in markets and that corporate borrowing costs would rise.

We bet that the market would swing by placing “call options” on the volatility index. They were tiny investments but went up a lot, some rising 100-fold. They added 4pc-5pc to our overall return. We also took out “credit default swaps” as an insurance policy on corporate borrowing costs going up, the same thing they used in

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telegraph.co.uk/ markets-hub the film The Big Short to bet against the American housing market.

HOW HAS YOUR BITCOIN INVESTMENT FARED? We bought around $600m (£434m) of Bitcoin in November, an allocation of 2.5pc across all Ruffer funds.

We have been surprised by how well it has done and how quickly – we were not expecting immediate fireworks. But the investment more than doubled in little more than a month, making us around $750m in profits. We took out some of this in December and January, but still have around 2.5pc invested.

We used to be sceptics, but everything changed in 2020. Negative interest rates and bond yields are everywhere, the war on cash has accelerated and our lives are far more digital than a year ago. Legitimate institutions are starting to buy in.

The environment for Bitcoin, which is a bit like a digital gold, could not be better.

DO YOU HAVE AN INSURANCE POLICY AGAINST BITCOIN FALLING? No. We are relying on the mix of investments in the portfolio to balance out the risk. It could fall by a lot at any point, so we do not want it to dominate, hence we are keeping the position small.

HAVE YOU MADE ANY OTHER CHANGES TO THE PORTFOLIO? We have bought more shares that should tap into the recovery after the pandemic but that should also hold up while the crisis is ongoing.

We added more to Walt Disney, for example, a business I think of as “a tax on parenthood”. Parents with young children cannot do without it and its streaming service has become invaluable as we are all locked up at home with our kids away from school.

When we are allowed out again it should still benefit from the other side of its business – its theme parks and its films shown in cinemas. It’s a nice each-way bet.

Uber is another. Its ride- hailing business is down, but its food delivery service has done very well.

WHAT HAVE BEEN YOUR BEST AND WORST INVESTMENTS? The best was Ocado, the online supermarket. We bought it in 2016 at 260p and today shares are worth about £28.

The worst was Games Workshop, the makers of Warhammer. We sold it too early at £ 20 a share; today the share price is around £100.

DO YOU HAVE YOUR OWN MONEY INVESTED IN THE FUND? Yes, 43,000 shares, which are worth

around £116,000.

HOW ARE YOU PAID? We get paid more if we perform well.

WHAT WOULD YOU HAVE BEEN IF NOT A MONEY MANAGER? A barrister – I like to argue.