Ruffer Investment Company Limited (LON:RICA) has announced its Monthly Investment Report for September 2026.
September was a challenging month for financial markets and the Ruffer strategy. As yields rose to multi-decade highs, equities and bonds fell together, yet the subdued nature of equity and credit market volatility meant that the positive returns from portfolio’s protections did not offset the fall in the other assets. Nevertheless, we took the opportunity to add to bonds, because we believe they now offer compelling value as well as potential downside protection if the economy slows down.
Short-term yields rose ahead of central bank policy rate hikes, and longer-dated yields also accelerated upwards, with the benchmark US 30 year yield closing above 5.6%, its highest level since 2002. This has been driven primarily by two forces: higher energy prices; and AI-propelled US economic strength. Geopolitical tensions remained high in September. Talks resumed between the US and Iran, but Houthi disruption in the Red Sea worsened, and Ukrainian drone attacks on Russian oil refineries intensified. Energy markets reacted, with Brent crude prices eclipsing $100 per barrel and diesel prices making all-time highs. Stronger economic growth – supported by considerable AI capital expenditure – also drove real (inflation-adjusted) yields higher. While the US technology sector may be able to tolerate rates at these levels, other, more rate-sensitive parts of the economy, such as the housing sector, are struggling.
The speed of the move in yields became more dislocative later in the month, triggering some of the rates market indicators we monitor. As a result, we deployed liquidity into US and Japanese long-dated government bonds. Should higher rates start to feed into higher equity and credit market volatility, the fund has potent derivative protection. However, the risk to the Ruffer portfolio in the near term is higher energy prices and yields without broader market contagion. Accordingly, we added to both direct crude and energy equity exposure as a portfolio offset, as well as topping up the agricultural commodity allocation. Given the possibility that US economic outperformance persists, we increased net US dollar exposure to 17% and initiated a small call option position on the tech-focused Nasdaq index.
Elsewhere in the portfolio, we made adjustments to our equities. We reduced China technology and took profits in software. We reinvested the proceeds into the heavy assets basket, which holds stocks with high margins and large asset bases that should benefit from higher nominal GDP growth. Finally, we were active in trading yen through the significant currency volatility, monetising profits from the options. The yen and US dollar exposures contributed positively to performance over the month.
We believe the bond market now presents a compelling value opportunity. While a continued grind down for bonds may be painful for the fund in the near term, further yield-induced market pain should trigger the protections, whereas a retracement in yields would benefit the portfolio’s equities and bonds.
The Board also continued their buybacks over the third quarter of 2026, purchasing 8.8 million shares. This brings the total purchased since 31 December 2024 to 46.2 million shares, or £130m, which equates to 14% of the shares outstanding at the start of 2025.
