Ruffer Investment: Bitcoin Is ‘A Unique Beast as an Emerging Store of Value’

On Tuesday (January 12), Jonathan Ruffer, Chairman of UK-based Ruffer Investment Company Limited (“Ruffer”), commented on his firm’s investment in Bitcoin.

A Brief History

Ruffer is a closed-ended investment company incorporated in Guernsey, an island in the English Channel. It was funded in 1994, and it has around 6,600 clients worldwide., “mainly individuals and families, pension funds and charities.” As of 30 November 2020, it had £20.3 billion (or roughly $26 billion) worth of assets under management (AUM).

On 15 December 2020, Ruffer announced that in November 2020, the managers of the “Ruffer Multi-Strategies Fund” had reduced the fund’s exposure to gold in favor of Bitcoin.

According to a Portfolio Update notice published on the website of the London Stock Exchange (LSE), Ruffer said that despite the turmoil caused by the COVID-19 pandemic, its portfolio had “made strong progress” in 2020, with a net asset value (NAV) total return of 12.2% (as of 8 December 2020):

In the spring and early summer, gold and the inflation-linked bonds performed well. More recently, the economically sensitive equities have reacted very positively to the success of the covid-19 vaccines, leading the portfolio higher.

More interestingly, Ruffer said that in November 2020 the managers of its Multi-Strategies Fund had made a defensive move, reducing the exposure to gold and adding exposure to Bitcoin, and that the size of this exposure was “currently equivalent to around 2.5% of the portfolio.”

Ruffer said that adding exposure to Bitcoin gave the fund “a small but potent insurance policy against the continuing devaluation of the world’s major currencies.” It went on to say that Bitcoin “diversifies the company’s (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see.”

Then on 16 December 2020, Zack Voell wrote in a report for Coindesk that a spokesperson for Ruffer Investment had clarified (via email) an important statement in the company’s portfolio update memo to shareholders.

More specifically, this person told Coindesk that the 2.5% figure mentioned in that memo was referring to the percentage of the firm’s AUM that represented Bitcoin exposure. In fact, he/she said that Ruffer’s Bitcoin exposure “totals around £550m, equivalent to around 2.7% of the firm’s assets under management.”

Ruffer’s Latest Comments on Bitcoin

Yesterday (January 11), Ruffer’s Chairman talked about his firm’s investment in Bitcoin as part of his company’s “2020 Q4 Investment Review“.

With regard to Bitcoin, here is what he had to say:

Finally, the announcement in December about Ruffer adding exposure to bitcoin produced a smattering of responses. The best was this two-worder: Happy Christmas. That seems about right for an initial investment equivalent to around 2.5% of the portfolio. Our underlying reasoning is that bitcoin is becoming a challenger to gold’s standing as the one supra-currency, the thing to own when fiat currencies are kerplunked.

We have done much work on assessing the danger that bitcoin is a wrong’un. We have been watching it for a longish time, and our judgement is that it is a unique beast as an emerging store of value, blending some of the benefits of technology and gold. Yes, it is a seemingly non-sensical asset – but one that makes absolute sense for how we see the world.

The question that followed was: when to make the move? A journey from pirate to president is a continuum, but an investment is a binary event – you either make it, or you don’t. We took the view that last November was not too soon, and if we left it any longer, subsequent price performance might make it feel too late.

So we made an allocation. At the time of writing, the entry price looks to have been favourable, but that’s not really the point. We are in the business of keeping clients safe, and we are nervously satisfied that bitcoin has a small part to play in the pudding.

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The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.

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