RIT Capital Partners 2016 half-yearly financial report in which Lord Rothschild highlight the many of the risks which he underlined in his 2015 statement remain.
Rothschild’s RIT Capital Partners – Company Highlights
The six months under review have seen central bankers continuing what is surely the greatest experiment in monetary policy in the history of the world. We are therefore in uncharted waters and it is impossible to predict the unintended consequences of very low interest rates, with some 30% of global government debt at negative yields, combined with quantitative easing on a massive scale. To date, at least in stock market terms, the policy has been successful with markets near their highs, while volatility on the whole has remained low. Nearly all classes of investment have been boosted by the rising monetary tide. Meanwhile, growth remains anaemic, with weak demand and deflation in many parts of the developed world.
Many of the risks which I underlined in my 2015 statement remain; indeed the geo-political situation has deteriorated with the UK having voted to leave the European Union, the presidential election in the US in November is likely to be unusually fraught, while the situation in China remains opaque and the slowing down of economic growth will surely lead to problems. Conflict in the Middle East continues and is unlikely to be resolved for many years. We have already felt the consequences of this in France, Germany and the USA in terrorist attacks.
In times like these, preservation of capital in real terms continues to be as important an objective as any in the management of your Company’s assets. In respect of your Company’s asset allocation, on quoted equities we have reduced our exposure from 55% to 44%. Our Sterling exposure was significantly reduced over the period to 34%, and currently stands at approximately 25%. We increased gold and precious metals to 8% by the end of June. We also increased our allocation to absolute return and credit, which delivered positive returns over the period, benefiting from a number of special situations. Within this category our new association with Eisler Capital had an encouraging start. We expect this part of the portfolio to be an increasingly important contributor to overall returns.
On currencies, we reduced our exposure to Sterling in anticipation of Brexit and the generally unsettled UK political environment. Our significant US Dollar position has now been somewhat reduced as, following the Dollar’s rise, we saw interesting opportunities in other currencies as well as gold, the latter reflecting our concerns about monetary policy and ever declining real yields.
The outcome of our efforts over a difficult period has been for your Company’s net asset value at the end of June to have increased by 3.6% (including dividends) to 1,613 pence per share. Our latest NAV at the end of July was 1,651 pence per share, representing an increase of 2.3% over the month. The net assets of your Company now amount to £2.6 billion, a new all-time high.
Following the first interim dividend of 15.5 pence paid in April, we have declared a second interim dividend of the same amount. This will be paid on 28 October to shareholders registered on 6 October, providing shareholders with a total dividend of 31 pence, a 3.3% increase over 2015.
12 August 2016
To deliver long-term capital growth, while preserving shareholders’ capital; to invest without the constraints of a formal benchmark, but to deliver for shareholders increases in capital value in excess of the relevant indices over time.
To invest in a widely diversified, international portfolio across a range of asset classes, both quoted and unquoted; to allocate part of the portfolio to exceptional managers in order to ensure access to the best external talent available.
See the full report below.