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The RIT stuff: why I’d buy RIT Capital Partners plc after FY results

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If you want to make money like the Rothschild family, well, you can. All you have to do is buy their investment trust, RIT Capital Partners (LSE: RCP), which is chaired by Lord Rothschild and used as a vehicle to manage the family wealth, and is freely traded on the London Stock Exchange.

Do the RIT thing

The £2.9 billion trust is renowned for its strong long-term performance, which continues in its 2016 results, published today. RIT Capital Partners posted a 12.1% rise in net asset value over the year, with a total share price return of 14.2%. The board also signalled its intention to pay a dividend of 32p per share in 2017, an increase of 3.2% over the previous year. However, with a yield of just 1.64%, this more of a growth than an income play.

It doesn’t aim to be a shoot-the-lights out fund, but performance has still been pretty rip-roaring. It is up 73% over the past five years, according to Trustnet.com, against 25% on the FTSE 100 and 33% on its benchmark index. That is impressive, given that it also aims to sell shelter some of its capital from market vicissitudes, which might normally act as a drag on growth. RIT Capital has now participated in 75% of market upside but only 39% of market declines.

Capital idea

By limiting its losses in tough times, RIT Capital Partners has less ground to make up when markets recover, and the fund has delivered a compounded total shareholder return of 12.9% a year since launch in 1988, easily thrashing its benchmark, which returned 6.8%. But it can still put on a show in the good times, for example, over the past 12 months it is up 24%, against 18% for the FTSE 100 and 20% for its benchmark.

This multi-asset international fund is not constrained by a formal benchmark but is free to invest in any global asset classes, with the aim of combining long-term growth with capital protection. It invests in public equity, private investments and a range of specialist external funds, such as the Eisler Capital Fund, BlackRock Frontiers and Martin Currie Japan.

Perfect partner

I owned the shares myself some years ago, with great joy, but that was in the days when I used to chop and change my portfolio, rather than buy and hold for the long term. Otherwise I would still hold it, and it would be one of the best performing funds in my possession.

The trust’s strategy looks particularly attractive in today’s market. Right now it is adopting a more cautious stance, trimming equity exposure, cutting allocation to sterling, shorting government bonds to get exposure to higher inflation, and balancing stock market exposure with absolute return strategies.

RIT Capital Partners has become a victim of its success, as it is currently trading at a whopping premium to net asset value of 7.93%. That is tribute to the respect investors have for this fund. You could wait for that premium to narrow but you might have to be very, very patient. Have you got the RIT stuff?

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.