Ruffer Investment Company takes profits on its dollar holdings and lowers exposure to equities as the defensive fund views markets with its customary caution. ), a leading defensive fund which uses a range of assets to limit capital losses, has cut its dollar exposure believing the US currency’s protective qualities have ‘waned’. Managers Steve Russell and Hamish Baillie have reduced the trust’s dollar holdings from 22% to 13% following a stellar year for the greenback in 2014 while lifting yen exposure to 10%. ‘The dollar has become a consensus trade and its protective qualities have waned as it has moved from a risk-off to a risk-on currency; strong US growth translates into earlier interest rate rises,’ the duo explained in their monthly update. ‘We believe the yen offers greater protection in the event of falling markets.' Sterling exposure within the portfolio remains high at 66%, which Baillie and Russell believe will help ‘avoid the ill-effects of a strong base currency should sterling bounce from its current levels’. Elsewhere the managers were relieved to have hedged the euro as the single currency tumbled to a seven-year low against the pound in response to the €1.1 trillion stimulus programme by the European Central Bank. Equities lowered Meanwhile the proportion of the trusts’ assets held in equities, or shares, slipped to 45% from 49% at the end of last year. The last time the trust’s exposure was around this level was in 2008. ‘This seems prudent after a strong run in many of our stocks and an uncertain outlook,' the managers said. Japanese equities continue to their biggest bet accounting for 18% of the £340 million portfolio, as the managers hope the Abe government’s efforts to drag the economy out of depression succeed. Financial stocks should benefit if reflation kicks off although recently they have struggled. ‘We have maintained our Japanese equity weighting as corporate results continue to surprise positively in Japan and market expectations remain subdued,’ said the managers. ‘It remains our preferred market in which to take equity risk; even without the helping hand of monetary policy, Japanese companies are performing well and shareholders are starting to see the benefits of an increased focus on returns on equity and distribution policies (through both dividends and share buybacks).’ Gold and 'linkers' shine The trust, which famously avoided losses in the 2008 financial crisis, currently sits on small premium over net asset value (NAV). Last month it posted a 2.5% rise in NAV versus a 2.6% rise in the FTSE All Share. Over five years NAV growth of the portfolio has been 35.5%. January was boosted by another strong performance from index-linked gilts in the UK and US. UK equities lost 0.33%, but this was offset by strong gains in European equity holdings, with German property stocks Deutsche Wohnen and TAG Immobilien market value rising 18% and 20% respectively. Gold and gold mining shares also added some lustre, returning 0.57%. ‘This remains a small position at 5% and encouragingly gold has begun to show the negative correlation with risk assets one would hope,’ Baille and Russell said. Overall the pair were satisfied with their start to the year, but looked ahead with some trepidation. ‘We remain cautious on the global economic outlook as markets remain detached from economic fundamentals and loose monetary policy has created distortions in markets that will be exposed when the rising tide of central bank induced liquidity begins to recede.’

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