RIT Capital Partners: how the Rothschild’s trust invests

Summary

In this insightful interview, Maggie Fenari, CEO of J. Rothschild Capital Management, discusses RIT Capital Partners’ strategy for wealth preservation and long-term growth. She highlights the trust’s diversified portfolio, balancing quoted equities, private assets, and uncorrelated strategies like credit. RIT’s ability to invest in top-tier, often exclusive funds and directly in promising companies has led to impressive returns. Fenari also addresses the importance of valuation discipline, particularly in the technology and private equity sectors. Overall, RIT offers a unique approach to risk-adjusted returns, providing investors with access to high-quality global assets and managers.

Takeaways

• 😀 RIT Capital Partners focuses on compounding wealth for its shareholders through a diversified global portfolio of public, private, and uncorrelated assets.
• 😀 Since its inception, a $10,000 investment in RIT Capital Partners would have grown to $350,000, demonstrating the trust's strong track record.
• 😀 The trust is often compared to other investment firms like Caledonia and Scottish Mortgage, but its focus on wealth preservation and risk-adjusted returns sets it apart.
• 😀 RIT's typical investor is long-term, seeking exposure to equity markets with less risk, as well as private assets with top-tier managers.
• 😀 The portfolio is divided into three main areas: quoted equities (30-60%), private assets (30-35%), and uncorrelated strategies like credit (20-25%).
• 😀 Quoted equity investments focus on identifying top managers and high-conviction opportunities, often through partnerships and direct investments in companies like National Grid and KBR.
• 😀 Valuation plays a critical role in investment decisions, especially when looking at growth sectors such as technology, where RIT invests in top quartile managers and funds.
• 😀 RIT has invested significantly in private equity, particularly in technology, and has achieved strong returns, such as a 15% annualized return from its private equity portfolio.
• 😀 The trust’s direct investments in private companies, such as Coupang and Lead, have resulted in impressive returns, demonstrating the effectiveness of their strategy.
• 😀 RIT employs a conservative approach to valuation, with quarterly market-based valuations for fund investments and semi-annual reviews for direct investments by an independent committee.
• 😀 Uncorrelated strategies, such as credit investments, help provide diversification and have proven successful in protecting capital during market downturns like the COVID-19 pandemic.

Q & A

What is the primary goal of RIT Capital Partners according to Maggie Fenari?

The primary goal of RIT Capital Partners is to compound wealth for shareholders over time. This is achieved through a diversified global portfolio that includes public assets, private assets, and credit strategies.

How does RIT Capital Partners differentiate itself from other investment trusts like Caledonia or Scottish Mortgage?

RIT Capital Partners differs by offering a more diversified approach, not just focusing on pure private equity or passive ETFs. It is viewed as a core diversifier in a portfolio, aiming to provide a better risk-adjusted return.

Who is the typical investor for RIT Capital Partners, and what are they looking for?

The typical investor is long-term focused, seeking exposure to equity markets with lower risk than the broader market. They are also interested in private assets managed by top quartile managers, along with a more global asset allocation.

How does RIT Capital Partners allocate its portfolio across different asset types?

RIT Capital Partners allocates its portfolio into three main pillars: quoted equities (30-60%), private assets (30-36%), and uncorrelated strategies like credit (20-25%), depending on the market outlook.

What is the approach RIT Capital Partners takes when selecting quoted equities?

RIT focuses on partnering with the best managers globally and seeks the most compelling opportunities through their talented internal team and relationships with managers. They also invest directly in some companies like National Grid and KBR.

How does RIT Capital Partners handle investments in the technology sector?

RIT Capital Partners invests in technology primarily through private equity, partnering with top quartile managers like Thrive, Founders Fund, and Iconic. They also have some exposure to technology in their quoted equities portfolio, including investments like Amazon.

Why is private equity important for RIT Capital Partners and its investors?

Private equity has been a successful strategy for RIT Capital Partners, generating over 15% IRR for investors in recent years. It provides access to high-growth opportunities through partnerships with the world's best managers.

How does RIT Capital Partners value its private equity investments?

RIT uses a rigorous internal process to value its private equity investments. Fund investments are marked to market quarterly, while direct investments are reviewed by an independent valuation committee twice a year and audited.

What role do uncorrelated strategies like credit play in RIT's portfolio?

Uncorrelated strategies like credit are crucial for diversification, protecting capital from equity market fluctuations. They provide strong asymmetric growth potential and are often investments that retail investors typically cannot access directly.

Can you provide an example of a successful investment made by RIT Capital Partners in recent years?

A notable example is RIT's investment in Coupang, the 'Amazon of South Korea.' They invested $50 million, which was realized at $340 million in under five years, reflecting strong growth in their private equity portfolio.