Lord Rothschild: Why I’ve sold hundreds of millions of pounds worth of shares, and bought gold
Lord Rothschild, chair of the £3.04 billion RIT Capital Partners investment trust, has revealed that while he has significantly reduced his exposure to listed shares, he has responded to the prevailing economic uncertainty by buying gold.
Lord Rothschild and his family have an investment of well over £100 million in the trust.
In his latest update to shareholders he commented that recent months 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 per cent 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’
The veteran investor continued, ‘The geopolitical 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 per cent to 44 per cent.’
He added, ‘Our Sterling exposure was significantly reduced over the period to 34 per cent, and currently stands at approximately 25 per cent. We increased gold and precious metals to 8 per cent 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. 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.’
RIT Capital Partners has returned 58 per cent over the past three years, compared to 15 per cent for the average trust in the AIC Flexible Investment sector, making it the top performing trust.
The trust trades at a premium to its net assets of 6.7 per cent.
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