Ruffer LLC opens up about its Bitcoin trade

Darren Sinden

JP Morgan analysts said last week that the price of Bitcoin could ultimately reach $146,000

London based asset management comoany Ruffer LLC has shared some details about the investment in Bitcoin it made back in November 2020.

The disclosures came as apart of a trading update by Ruffer’s UK listed division Ruffer Investment Company Limited which trades under the ticker RICA.

Ruffer told investors that it is up by 90% on its Bitcoin holdings and that two equity proxies for Bitcoin, that it had also bought had more than doubled in value.

In November Ruffer’s investments managers took a strategic decision to invest 2.0% of the businesses total assets under management into the cryptocurrency and related instruments. That group-wide investment was worth £550 million or around $748 million.

Ruffer has shed some light on the thinking behind the trade the trading update saying: “Our rationale has been well publicised but briefly, we have a history of using unconventional protections in our portfolio. This is another example, of a small allocation to an idiosyncratic asset class which we think brings something significantly different to the portfolio”

The report continued “Due to zero interest rates the investment world is desperate for new safe-havens and uncorrelated assets. We think we are relatively early to this, at the foothills of a long trend of institutional adoption and financialization of bitcoin”

Ruffer doesn’t seem to be under any illusions about the risks in trading in Bitcoin or the idea that Bitcoin will come to be taken up by a majority of institutional investors.

In fact, its trading update addressed those issues head-on commenting that:” ‘Think of bitcoin’s bad reputation as a risk premium – as we move through the process of normalisation, regulation, and institutionalisation, the compression of this premium can have a dramatic effect on the price”.

The managers added that “If we are wrong, bitcoin will return to the shadows and we will lose money – this explains why we have kept the position size small but meaningful.”

Ruffer’s Bitcoin trade has attracted publicity largely because of the headline profits it was presumed to have made and these are indeed substantial. However, the trade was clearly made after considerable thought and as a longer-term hedge against uncertainties in the global economy that Ruffer perceives elsewhere.

Bitcoin is the ultimate Marmite investment, Marmite being a British slang term for something which polarizes opinions, based on the British food’s long term”You either love it or you hate it” advertising campaign which is now used to define all kinds of products in all sectors.

JP Morgan analysts said last week that the price of Bitcoin could ultimately reach $146,000 as the available supply of new coins begins to dwindle and they become mathematically harder and more expensive to mine.

Regulators in the UK believe cryptocurrencies to be inherently risky and recently warned investors that they should be prepared to lose all of their money if they trade in them.

Meanwhile, new exchange-traded products continue to appear, yesterday digital asset manager CoinShares announced that it would become the latest company to list a Bitcoin-related fund on Switzerland’s Six Exchange. Which as we recently reported is becoming a go-to destination for such products.

Following the CoinShares ETP launch, there will be 35 Crypto oriented ETPs available on the Swiss exchange.

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