Why we invested in bitcoin – The Property Chronicle
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Why we invested in bitcoin

The Fund Manager

Surfing a wave of institutional adoption… and liquidity.

The best investments are often the least comfortable ones. This is certainly the case with our decision to add bitcoin exposure to Ruffer’s portfolios in November last year.

Many people seem puzzled with our involvement. Either because we took a position in the first place or because we sold our exposure. Or because our clients made money from bitcoin – getting lucky on a bad bet that went right for all the wrong reasons. Or so the commentary goes.

So why did we do it?

Asset allocators today face two existential, and interlinked, questions: first, is inflation making a generational comeback and, second, is the balanced portfolio dead? These are multi-trillion dollar questions. And if the answer to either question is yes, what do you do with your bonds?

The implications for conventional balanced portfolios are profound and painful. Bond yields rise, so bond prices fall. Equities de-rate, so equity prices fall. Worse, the two asset classes become positively correlated, which is the opposite of the past 40 years. In crypto speak, you get ‘rekt’ (wrecked)!

Investors survey a menu of asset classes offering low expected returns and a lack of diversifying or protective characteristics. So, what on earth do you do?

The self-serving answer is your bonds – 20%, 40%, whatever – should become a Ruffer allocation. The more nuanced answer is your bonds need to transition to real assets offering inflation protection.

There are a lot out there to consider, each with their own advantages and pitfalls. Inflation-linked bonds, gold, property, infrastructure, commodities – the list goes on.

The Fund Manager

About Duncan MacInnes

Duncan MacInnes

Duncan joined Ruffer in 2012. He graduated from Glasgow University School of Law in 2007 and spent four years working at Barclays Wealth and Barclays Capital in Glasgow, London and Singapore. Duncan is a CFA charterholder. He is co–manager of Ruffer Investment Company.

Articles by Duncan MacInnes

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