Magazine article The Spectator

Trying Not to Be Too Clever

Magazine article The Spectator

Trying Not to Be Too Clever

Article excerpt

Fund manager Jonathan Ruffer foresaw the credit crunch and protected his clients' wealth. Now he's worried about inflation

Before he became one of London's most admired fund managers, Jonathan Ruffer had, by his own account, two spectacularly unsuccessful spells as a barrister. Not long into our interview, I gain a clue as to why this seemingly harsh self assessment might be true. We're discussing the credit crunch, which he predicted well before it hit, and policymakers' responses to it. Ruffer is explaining where the Japanese went wrong 20 years ago when their economy first showed signs of slumping into debt deflation, from which it has still fully to recover. 'So what you're saying they should have done is . . .' I prompt, not certain that readers would follow Ruffer's meaning to this point. 'Borrowed more money. Devalued the currency, ' he replies. 'The point is. . .

um. . . there was about to be a brilliant point, Jonathan, and it's gone.' 'I interrupted you, ' I apologise. 'No, not at all. But write down "brilliant point. . . to be confirmed later!"' Which I do, though not before wondering how this approach might have played before a po-faced High Court judge.

Fortunately, Ruffer has little reason to fret about his previous profession. Since setting up his own investment firm in 1994, he has not only made money for himself, which many other fund managers have also done, but been remarkably successful in not losing his clients' money, a rarer phenomenon. The last decade has been unusually hazardous for investors, and many hitherto illustrious reputations have been shown to be undeserved. Yet, almost alone amongst his peers, there has been virtually no single 12-month period in the last decade when Ruffer's clients have lost money. While shares returned nothing and markets yoyo-ed violently, his funds and client portfolios compounded at 12 per cent per annum, with low volatility. His firm now handles around £8 billion of institutional and 'Old Rectory' money, spread across a range of absolute-return funds and discretionary portfolios.

Although he confesses to a degree of arrogance, the amiable Ruffer is some way removed from the desiccated calculating machines who call the shots in many hedge funds. His track record should not be misinterpreted, he says. Although so-called 'absolute return' funds - claiming to make money for investors whichever way markets move - have been popular in recent years, the idea is a nonsense because 'If I say to you, "We're trying very hard not to lose any money", then by definition what I'm saying is "I'm trying very hard to be riskless".

But if I'm also saying we're trying to make, say, 10 per cent a year, by definition what I'm saying is that we're putting risk into the portfolio. That opens up the question, "Well, which is it? Are you taking risk or aren't you taking risk? You can't be doing both."' Dishonest aspirations are nothing new in a sector where marketing imperatives routinely take precedence over substance. It was, says Ruffer, one reason why he started his own firm. 'I have a crusading spirit about private-client fund management, which I think is done really badly. Our business was set up in reaction against the way the industry works. . . Of the two flags I put up the flagpole, one was trying to surround myself with people who are mad keen on investment. The point of investment is to take on the markets. Investment management attracts a lot of people who are kind to labradors and all the rest of it, but actually comparatively few of them really want to take the markets on. …

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