Ruffer made money for its fund and investment trust investors even as stock markets tumbled in March
founded by Jonathan Ruffer, 68, has around $23billion (£18billion) of funds under management.
Fund manager Ruffer raked in more than £2billion last month for its investors from a series of trades to protect against the collapse in stock markets.
Shares fell sharply in March as the Covid-19 pandemic spooked financial markets, with the S&P 500 index in the US falling more than 30 per cent.
Ruffer’s flagship Total Return fund was up 3.7 per cent in March, while its investment trust rose 3.3 per cent.
This pushed the Vix volatility index – dubbed Wall Street’s ‘fear gauge’ – to higher levels than seen during the last financial crisis more than a decade ago.
Ruffer, based in Westminster in London, has revealed it made huge profits from a series of complicated trades, which helped offset losses as stock markets were hammered.
These included a gain of more than $800million (£633million) after buying just $22million (£17million) of derivatives that prosper if volatility rises, which usually happens if shares fall.
It also made a $1.8billion (£1.4billion) profit after buying equity, gold and credit derivatives to cushion itself against losses.
The firm, founded by Jonathan Ruffer, 68, has around $23billion (£18billion) of funds under management.
Ruffer trust gained in March as market tumbled
The Ruffer Investment Company investment trust was one of the few to rise in March as stock markets dived. Broker AJ Bell said that Ruffer gained 3.3 per cent in March, while fellow capital preservation trust Personal Assets rose 0.8 per cent but all their other peers fell.
Ruffer, which runs funds and the Ruffer trust, said that it fears that a hangover from emergency measures to combat coronavirus may trigger falls in the bond and stock market at the same time.
This would stand in opposition to investment theory, which says that high quality government bonds and shares act as a counter weight to each other.
Alexander Chartres, investment director at Ruffer, said: ‘The coronavirus is especially dangerous for those with underlying conditions, and history’s longest bull market – living on a glut of borrowed money and time – was one such victim.
‘The era of monetary policy supremacy is another, and for long-term investors, this is game-changing.
‘At peak turmoil, conventional offsets such as bonds and gold have proved flaky friends: investors sold what they could, not what they perhaps should, but specialist crash protections allowed Ruffer portfolios to hold their ground.
‘Monetary policy alone is impotent in the face of a simultaneous collapse in supply and demand. Enter ‘helicopter money’ – central bank financing of governments’ fiscal stimulus of the real economy.
‘This fiscal spending will hit the real economy just as supply chains are reengineered for resilience rather than efficiency. Longer-term, higher real world inflation is likely, even as rates remain nailed to the floor to make the Covid-19 fiscal blitz affordable.
‘This deeper financial repression could transform the investment landscape. Rather than offsetting one another, stocks and bonds could fall together if inflation rose materially, and investors would need to rethink core strategies.
‘We believe the solution needs to include inflation-protected bonds, gold, defence against further deterioration in credit markets, and the right sort of equities for a changing world. We own some of each.’