The idea of a family office dates back to ancient Roman times, but the more contemporary iterations emerged in the 19th century, popularized by figures such as the Rockefellers, Morgans, and DuPonts.
To effectively manage wealth across generations, one needs a skilled team, a structured investment strategy, a long-term vision, and a focus on preserving capital. Fortunately, such expertise is readily available in the UK’s investment trust sector, and you don’t need to be a Rockefeller to take advantage of it.
CLDN and RCP
Caledonia Investments (CLDN) and RIT Capital Partners (RCP) are closely aligned, employing investment strategies aimed at both safeguarding capital and generating real returns over the medium-to-long term. The goal for any investor is to benefit from the gains in booming markets while minimizing the losses during downturns.
Both trusts have shown their capacity to provide solid total returns, with five-year annualized net asset value (NAV) returns of 13.6% for CLDN and 9.3% for RCP. These rates have notably outpaced inflation and stand favorably against the 11% annualized total return of the FTSE All Share index during the same timeframe. Importantly, these returns have also been achieved with significantly lower volatility than broader equity benchmark indices.
Digging Into Each
CLDN is a self-managed investment firm led by Mat Masters (chief executive) and Rob Memmott (chief financial officer). It benefits from specialized teams focused on the key asset classes within its portfolio: public companies, private capital, and private equity funds, each receiving roughly equal allocation.
Similarly, RCP is a self-managed investment firm guided by Maggie Fanari (chief executive) and Nick Khuu (chief information officer), both seasoned multi-asset investors. RCP has a greater emphasis on public companies, making up 44% of its portfolio, while private investments account for 33%. Additionally, a quarter of its capital is allocated to uncorrelated strategies. The public equity portfolio features opportunities in China and Japan, investment in biotech firms, and includes various small and mid-cap companies.
RCP has achieved significant value from its private investments, with noteworthy recent events including the sale of Xapo Bank, the public listing of Webull, and Wiz’s acquisition by Alphabet. This segment of the portfolio has substantial growth potential, especially with its investments in Motive (a leading logistics software), Kraken (a cryptocurrency exchange), and Epic (a top US electronic health records company).
The Benefits of the Two
Both trusts showcase not only robust risk-adjusted returns and deep expertise but also well-balanced portfolios. They each provide dividends, with CLDN having raised its dividend for 57 consecutive years, currently yielding 1.9%. RCP yields 2.1% and intends to increase its 2025 dividend by 10.3%.
Wider-than-average discounts present an appealing entry point for these strategies. A decade ago, CLDN and RCP were trading at a 16% discount and a 1% premium, respectively. However, since 2022, these discounts have significantly widened; CLDN now trades at a 32% discount, while RCP stands at a 27% discount. In line with the broader trend among investment trusts, both CLDN and RCP have been actively repurchasing their shares.
