An interview with Duncan MacInnes, Investment Director, Ruffer, Edinburgh office

Date: 21 Mar 2023

Karen Jones

Ruffer are a wealth manager, who have great respect from peers and clients and with a 28-year track record of 8.8% net yearly returns and £26.5 billion under management, it is understandable to see why.

Ruffer, who started in 1994 working with private clients, have since diversified into the institutional market including pension funds, a Sovereign wealth fund and 10% of the business is with family offices. Although private clients still make up 27% of their client base which is predominantly a UK centric. The original founder is still involved, Jonathan Ruffer who started as a stockbroker, before becoming a barrister. he co-founded Ruffer with Robert Shirley, then Viscount Tamworth and Jane Tufnell who retired in 2014. The firm managed £15.4 billion on behalf of its clients in 2012 and then had 199 employees. In 2023 they are up to 330 employees, made up of roughly ten in Edinburgh, 15 in Paris, a handful in Guernsey and the rest in London although a New York opening with 5-10 staff is imminent.

Duncan MacInnes, Investment Director in the Edinburgh office, Joined Ruffer in 2012. He graduated from the University of Glasgow School of Law in 2007 and has worked both in London and Singapore. He is co-manager of two of Ruffer’s flagship funds. Talking about the Ruffer diversified return fund, he says it is UK centric and managed in sterling, mainly because current investments are with London listed companies like Shell and BP.  In 2021, he says, it grew to £2bn which was the single biggest fund receiving inflows in the UK. “We had a lot of interest from family offices, endowments, sovereign funds.”

He says in 2021 he got a lot of push-back from clients who felt everything would go EV. But he says: “What has been striking has been the mood has changed. The war and covid have over shone ESG issues because of supply chain security.” He continues “War focused attention on commodities but we’ve always thought ESG was more complicated. We realized how essential energy was and that we couldn’t transition away from fossil fuels so quickly.”

He says another extreme example is the defense companies like General Dynamics and BA systems which were considered to have ‘bad’ ESG. Then adds: “It’s not so bad if we are fighting Russia, client sentiment has changed to see that these organisations are necessary. However, with tobacco it is hard to see that, but energy and defense were not liked but now they are accepted.”

Scotland was in the news at the time of speaking so I asked about Nicola Sturgeon who has been a controversial leader of Scotland. “She is a great politician, maybe the best in the UK, even with difficult views. There isn’t really anyone else to step in of a similar stature.” However he adds that, “she knew her time was up.”

Despite the change in sentiment with some industries like defense and energy, Ruffer are still applying pressure to companies who aren’t changing to adapt to ESG rules. He cites Arcelor Mittal who are steel manufacturers which is considered a “dirty industry”. Ruffer campaigned to get them to reduce their carbon foot print. He says “We are not big enough alone but we joined forces with other investors. We think a black and white approach to ESG is not the right one but work can still be done to improve industries we invest in.” He does add though that some companies will really struggle in future, for instance cruise liners dumping oil into the sea. He says: “That is an investment theme. ESG is inflationary, so companies who could operate before, dumping oil with no cost, will now have to spend money to clean up their processes. This costs money and will be very expensive for them.”

He adds: “Last year everything fell but the dollar. We were up, depending on the fund 5-8%. What was good was derivatives, interest rate hedges and options. We thought, why take the risk on the stock market versus cash which pays the same? Invest grade bonds are lower than cash which means the yield curve is inverted which could mean panic selling at the end of the year in a recession.”

And as the world now knows, panic was certainly what was about to set in as Credit Suisse slipped like the Titanic into the water and SVB got shuttered by The Fed with all manner of debate as to the global aftermath. However, it seems, Ruffer is ahead of the storm and ready to navigate the more choppy water ahead.

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