What the Rothschilds are buying now

Lord Jacob Rothschild is not happy. The share price of his investment trust RIT Capital Partners (LSE: RCP) - fell by 9.6% between April and September this year. That's still better than the markets (the FTSE All-Share Index fell 13.5% over the same period), but as Rothschild concedes, "these latest results keep us ahead of the game, but it is the game itself which is unpleasant." This is something he is "determined to address".

Lord Rothschild, now 75, took the reigns of the Rothschild Investment Trust in 1980, after losing a power struggle to control the family's bank. Renamed RIT Capital Partners, the FTSE-listed investment trust has outperformed the index strongly, returning almost 170% over the last ten years.

Unsurprisingly, one of the main reasons for the recent weakness is Europe. "These have been some of the most torrid markets of my lifetime Europe has been lead violinist in a discordant band." He doesn't think the situation will improve soon either. "It is increasingly clear that Europe's challenges have not been adequately addressed by recent developments." Nevertheless, the veteran investor believes there are ways to profit from the "glaring and global risks confronting us".

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The fund invests across a range of asset classes and uses financial derivatives giving Rothschild a pretty free hand. When it comes to currencies he is cautious on the pound and the euro but more bullish on the US, Canadian and Singaporean dollars.

As for shares, Rothschild admits that it is difficult to know "whether equity markets are continuing to exhibit too much complacency about the outlook or whether, after a decade of flat global market returns, the price of equities takes account of the risks".

Like us at MoneyWeek, he is keen on "large companies with strong franchises and balance sheets: their stability, when coupled with attractive dividend yields and cash flows, offers relatively safe exposure to equities".

More surprising is the news that RIT is building up holdings in growth sectors such as technology, healthcare and biotechnology. It's a new move for the trust but Rothschild is keen to target firms that can make money "despite tepid GDP growth".

Unlike most investors Rothschild also sees opportunities in the European banking sector. He has no interest in buying their shares, however, but in picking up their assets on the cheap. "Banks, especially in Europe, will be selling assets possibly at much discounted levels", says Rothschild.