Hollands, managing director of business development and communications at Bestinvest, says he has held the closed-ended fund in his personal portfolio since the mid-1990s but says it will remain there for the foreseeable future. He says that it is a good holding for a private investor looking for a one-stop-shop to the global market, given its well diversified portfolio.
“For a buy and hold I like RIT Capital Partners, which I’ve personally held for more than 15 years,” Hollands said.
“The trust is closely associated with the Rothschild family and is chaired by Lord Rothschild. It is highly diversified and invests globally across both listed equity markets and unlisted funds in direct situations as well as via specialist funds including private equity funds, absolute return and commodities funds.”
“The trust uses both in-house and third-party managers, with 70 per cent of the quoted equities portfolios farmed out externally,” he added.
RIT Capital Partners was launched back in 1987. While it has a very good long term track record, returns have fallen off in recent years.
According to FE Analytics, the investment trust has returned a stellar 264.06 per cent over 15 years, beating its benchmark – the MSCI World index – by 174.51 percentage points in the process.
Performance of trust versus index over 15yrs
Source: FE Analytics
Over 10 years the closed-ended fund has still considerably beaten its benchmark; however since then the RIT Capital Partners trust has had a disappointing run.
The trust has failed to beat the index over one, three and five years. The most dramatic of those has been over three years, during which time RIT Capital Partners has returned just 2.15 per cent, compard to the MSCI World Index’s 33.49 per cent.
Nevertheless, Hollands says that the trust remains a good long-term bet, and says the recent widening of the discount has opened up a potential buying opportunity for investor’s.
“The approach has a strong emphasis on capital preservation and given the unlisted holdings it will often underperform in a strongly rising market for listed equities,” he said.
“As such performance has been weaker during the last couple of years and the trust is currently trading at an 11 per cent discount which presents a potentially attractive entry point for a vehicle that has frequently traded at a premium in the past and has had an average discount of around 4 per cent.”
Performance of trust versus index over 3yrs
Source: FE Analytics
“The trust has undergone some changes over the last year, with GAM’s Ron Tabbouche being brought on board as an investment director, who has reduced the number of holdings,” he added.
The discount, at the time of writing, has narrowed since we spoke to Hollands but is still at 8.5 per cent. This is significantly higher than its three year average discount, of 0.25 per cent.
Charles Cade, head of research at Numis Securities, agrees that the 8.5 per cent discount provides an attractive buying opportunity, and says that investors shouldn’t be put off the trust’s previous poor performance.
“RIT Capital seeks to deliver long term capital growth without the constraints of a formal benchmark. The NAV return is always likely to lag equity markets during strong rallies, as a significant part of the portfolio is invested in unquoted assets,” he said.
“However, the fund has an exceptional performance record over the long term. After dull performance in 2012, the portfolio is now better positioned to benefit from strong markets.”
“This follows a number of management changes over the past year, including the appointment of Ron Tabbouche from GAM as investment director, and Graham Thomas as head of private Investments.”
Cade continued: “We believe that there is now a more disciplined investment process, with the establishment of an Executive Investment Committee headed by Graham Thomas. Furthermore, the fund continues to benefit from the experience and contacts of Lord Rothschild, the chairman.”
“We believe that this is an attractive entry point for investors given that the fund has often traded at a premium,” he added.
The RIT Capital Partners trust is highly diversified across regions, sectors and currencies.
The closed-ended fund predominantly holds equities and its highest regional weighting is in the US, making up 42 per cent of the portfolio. Around a third of the trust’s assets are denominated in US dollars.
RIT Capital Partners has ongoing charges of 1.32 per cent, excluding performance fee.