Rothschild trust assets at record levels despite "uncharted waters"

Oliver Gill
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Reception To Mark The Prince of Wales Medal for Philanthropy 2013
Lord Rothschild has a banking career that stretches back to the 1960s (Source: Getty)

While we may be in the middle of what Lord Rothschild described as "what is surely the greatest experiment in monetary policy in the history of the world", the investment trust he chairs hit all-time asset value highs.

RIT Capital Partners announced that its assets stood at £2.5bn with net assets growing by £567m in the last three years.

The figures

Asset values grew by £87.9m over the six months to 30 June 2016 with the net asset value of the trust growing by 3.6 per cent.

Dividends declared nudged up 3.3 per cent over the previous year to 15.5p per share.

The average premium – the excess that trust trades on the stock market compared to the value of the underlying investments – was 4.2 per cent.

The trust's sterling exposure declined from 47 per cent to 34 per cent compared to the same time last year. However the dollar exposure also declined from 67 per cent to 59 per cent.

Read more: Jacob Rothschild investment trust says no to alliance with rival

Why it's interesting

The 3.6 per cent growth in the net asset value is actually less than the return of global stock markets – the MSCI World Index grew by 6.1 per cent.

Meanwhile, the share price of the trust actually fell over the first six months by 1.2 per cent.

This is because the value of the trust is only indirectly linked to the value of the underlying investments. It contrasts with open-ended funds whose values are directly linked to the value of the investments contained in the vehicle. Investment trusts like RIT are traded on the stock exchange and include the expectations of investors.

While net assets have grown by over a fifth in the last three years. the share price increased by nearly half (48.8 per cent) indicating that the markets believe that the investment manager is on the right track.

The trust changed its asset allocation despite the recent rally in the markets. It reduced equity exposure from 67 per cent to 59 per cent, ramping up allocation to absolute return and credit – investments that are intended to provide positive returns whatever the market conditions.

What Lord Rothschild said

The six months under review 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.

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.

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