The best time to look at a capital preservation fund is not when a market sell-off is already underway but when stocks are still holding up reasonably well.

In this context a 10% year-to-date share price reverse at investment trust Ruffer Investment Company (RICA) looks an attractive entry opportunity for investors worried by the prospect of stock market reversals ahead.

Ruffer tends to shine during turbulent periods but hasn’t done as well year-to-date with its net asset value (NAV) down 4% as at 28 April 2023; investors have shrugged off US banking system stresses, war, a likely recession and the possibility of a debt default in Washington while bidding up technology stocks in the hope inflation is cooling and the rate rise cycle is coming to an end.

But there are more than enough uncertainties on the horizon to warrant buying Ruffer right now, particularly as the shares are trading at a 3% discount to NAV versus a 12-month average premium of 2.1%.

Ruffer is an investment trust that focuses on preserving and growing real – i.e. inflation adjusted – capital, regardless of financial market conditions, has a track record of making money in up and down markets and seeks to guard against inflation, which remains stubbornly high.

Ruffer hasn’t been alone in struggling in 2023,  fellow wealth preservation trust Capital Gearing (CGT), which delivered a disappointing NAV total return of -3.6% for the year to March 2023.

This flexible investment trust can invest in multiple asset classes including individual shares, with Shell (SHEL), BP (BP.) and Taiwan Semiconductor Manufacturing Company (TSM:NYSE) among top 10 equity holdings at last count, as well as government bonds, gold and unconventional asset classes if the managers so wish, leaving Ruffer well-equipped to deal with any economic and market volatility ahead.

Notably Ruffer reduced its weighting towards equities to its lowest levels in 20 years in 2022. In its monthly report for April, it highlighted fears over an ‘asset market liquidation’ and reminded investors it always aims to create a portfolio that is ‘robust to multiple future pathways’. The managers pointed out that if the Federal Reserve set the scene for interest rate cuts before inflation is wrung out of the system, Ruffer’s inflation-linked bonds, gold and commodities should get an ‘immediate tailwind’.

But if interest rates remain where they are, let alone go higher, and quantitative tightening continues, then the ‘painful chokehold’ of the interest rate squeeze will continue and in this environment, Ruffer’s portfolio is protected by its low equity weight and ‘potent protections against likely distress in credit markets’.

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