EuropeJun 7 2021

Ruffer looks to Europe for growth

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Ruffer looks to Europe for growth
Simon Dawson/Bloomberg

The managers of the Ruffer Investment Trust have upped their exposure to European equities, saying the region will soon “receive the torch in the global economic growth relay.”

In a statement to the stock exchange this morning (June 7), the trust’s managers Duncan MacInnes and Hamish Baillie said they have been adding to European equities, expecting that as lockdowns end they assets will rise sharply.

They said: “The US is currently the fastest runner, something reflected in US equity outperformance, but as lockdowns end Europe is very much on the move and will soon take the torch from the US."

They added this growth spurt should see a rise in eurozone bond yields, a stronger euro, weaker dollar and strong performance from European financials.

The pair highlighted Italy as benefitting disproportionately from the recovery, saying “UniCredit is our preferred expression of this”.

According to data from the Investment Association, outflows from European equities (excluding the UK) slowed between March and April. Around £365m left the sector in March, with just £85m leaving in April this year. 

Outflows from European equities including the UK also slowed, from £76m net in March to £4m in March.

The fund’s managers also outlined how the fund had sold its indirect exposure to bitcoin (bought in November last year) in its entirety before the currency lost around 35 per cent of its value in April.

The cryptocurrency fell from a height of £45,881 on April 15 to £35,375 ten days later. On June 6 it was trading at £25,275.

Ruffer’s managers said of the asset: “The bitcoin exposure was put into the portfolio as a defensive investment, to add diversification to our inflation hedges.

"Its strong rise thereafter reflected increased institutional and retail interest, and as it hit all-time highs in April we judged its asymmetry to be much lower (and importantly the threat to gold to be lower too).

"With more attractive risk-adjusted positions elsewhere in the market we sold the remaining exposure."

In January, Duncan MacInnes outlined the decision to invest in bitcoin, saying that 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.”