It’s all change at RIT Capital Partners, the listed investment vehicle of the Rothschild family and one of the most popular investment trusts in London. First, Ron Tabbouche, the chief investment officer of the RIT-owned fund manager that runs the portfolio, left in November; now, Francesco Goedhuis, the chief executive, is going, because of a family illness.
The new broom is Maggie Fanari, at present the head of high-conviction investments at the Ontario Teachers Pension Plan. Well, not that much of a new broom. She has sat on the RIT board as a non-executive director for the past four years. She arrives as a full-timer in March.
The Ontario Teachers Pension Plan has been a consistently successful institutional investor over decades, though still quite capable of making the occasional blunder. It was a major backer of FTX, the collapsed bitcoin business exposed in 2022 as a massive fraud. RIT investors must hope that wasn’t one of Fanari’s “high-conviction” wagers. Sir James Leigh-Pemberton, the RIT chairman, says her record at Ontario has been “outstanding”.
It doesn’t sound like the appointment will signal any big change in RIT’s investment philosophy, one that has shifted already since its heyday under Lord (Jacob) Rothshild, when an emphasis on capital preservation was combined with an opportunistic approach to markets and stock selection. The very long-run annual return of 10.7 per cent remains impressive to this day. RIT has turned £10,000 at its launch in 1988 to £345,000 in 2024.
Yet recent years have been disappointing. RIT has underperformed over one, three and five years and the shares languish at a 25.6 per cent discount to net assets, in spite of a supportive £160 million share buyback programme. Among other UK trusts in the “flexible investments” category, it ranks 16th out of 22 for total return over five years. Last year Fidelity dropped it from its personal investment platform.
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The big concern is that RIT has pushed very heavily into unlisted company investments, with 39.8 per cent of its portfolio allotted to private equity. The jury is still out on whether it has picked enough successes to offset the inevitable duds and whether it is valuing these unlisted assets conservatively enough.
It has banked a decent, recent profit from its backing of Infinity, the data centres group, while it says it has made two and four times its money from two other unnamed investment exits. A big test comes in the next few months with two other investments — WeBull, the New York investment platform, and Motive, the logistics group — both dusting off flotation plans.
Meanwhile, the existing RIT managers seem to be rootling out promising investments in areas such as high-yield credit and Japanese equities.
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For years RIT, a FTSE 250 company, has traded on the Rothschild connection. Latter-day Rothschilds still own 20 per cent of the company. If it is good enough for a family that has managed to stay wealthy for 200 years, it seems to be good enough for many private investors. Hannah Rothschild, a novelist and philanthropist and the eldest daughter of Jacob, now sits on the board.
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Nevertheless, the premium name comes at a price. Wages and bonuses paid to staff in the management company came to £35.6 million last year, albeit down 11 per cent on the previous 12 months. It doesn’t help that they work out of one of the great palaces of Georgian London — Spencer House, overlooking Green Park. This doesn’t look like a trust, which owns the leasehold, with too much focus on keeping costs down.
The next year or so will help to establish the wisdom, or folly, of RIT’s private equity foray. Fanari has bags to prove, but, with a bit of luck and a receptive flotation season, she could significantly narrow that yawning discount. This is a case where there is not enough reason to buy the shares, but just enough hope not to sell.
Advice: Hold
Why: Valuation worries persist, but it has a chance to bank decent profits if IPO window reopens
Next
While many retailers moaned about the weather last year, Next got on with the job (Isabella Fish writes).
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It has raised its forecasts for both sales growth and profits five times over the past dozen months and last week Lord Wolfson of Aspley Guise, its boss, declared that full-price sales had increased by 5.7 per cent, better than expected, in the crucial nine weeks to the end of December.
Wolfson, who has made a habit of prudent forecasting, now expects full-year pre-tax profits of £905 million, £20 million higher than suggested previously and 4 per cent up on last year. Of the increase in profit, £17 million is due to come from the rise in sales and £3 million from an upgraded prediction for full-price sales in January. Next also pointed to a more “benign” outlook for the consumer than there has been for a while, flagging better wage growth and zero sales price inflation that should drive future sales momentum.
All of which offers a reminder that, irrespective of the weather, retailers can succeed with the right product offering and at the right price point.
However, as Wolfson admitted, the generally sunny outlook is not cloud-free. The retailer warned of some “significant uncertainties” ahead, which it said included a weaker employment market, higher mortgage rates as deals expire and delays to stock deliveries caused by attacks on shipping in the Red Sea. Wolfson said the latter could delay deliveries and affect sales, but does not expect it to “dramatically” affect trading.
Meanwhile, the retailer’s Total Platform is beginning to contribute more meaningfully. Wolfson said the online platform now had the IT and warehouse capacity to do further deals and to add more brands, which could help to deliver modest profit growth over the long term and suggesting that it could go on to become an alternative driver of future shareholder value.
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Next reckons it can generate about £100 million more surplus cash than the previous guidance given in September, which also means shareholders should expect more share buybacks.
Its shares trade at 14 times forward earnings, relatively cheap and in line with their long-run average.
Advice Buy
Why Next’s online platform will deliver modest profit growth over the long term
