Ruffer Investment Company has bought back 150,000 shares at £2.6325 per share, marking its first ever share buyback since its inception in 2004.
The company announced it had made the purchase, which represents approximately 0.04% of its current issued shares, yesterday (22 August).
The news comes as the trust has struggled in recent months amid heightened global volatility while doubling down on its defensive strategy. Over the past six months, Ruffer is down 15%, according to data from FE fundinfo.
Its protective assets, such as inflation-linked bonds, have hurt performance, while its growth assets in commodities and equities geared to the real economy were hit by the recent slowdown in China.
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The trust had generally been trading on a premium of around 1-2% at the start of the year, but fell to a 2.5% discount in May and plummeted further to 7.5% at the end of June.
The buyback price represents a 6.3% discount to the NAV of £2.81 as at 15 August. As of 22 August, it is trading on a 5.07% discount, according to FE fundinfo.
In a research note, Ewan Lovett-Turner, investment companies analyst at Numis, said: "It will be interesting to see whether buybacks from Ruffer continue, and at what scale and frequency. Large portions of the portfolio are liquid and therefore it should have some firepower to undertake buybacks."
Share buybacks are often used as a discount control mechanism to manage a trust's discount, but Lovett-Turner warned "they are never going to be a silver bullet".
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He added: "Instead, we believe they can be a very powerful signal from a board that it is focused on shareholder interests, as well as benefits including NAV accretion, limiting discount volatility and demonstrating confidence in the NAV."
The trust has annual redemption facility for up to 25% of share capital which can be operated in November at the board's discretion. This was last operated in 2007, where approximately 16% took it up.
Increased use of buybacks in industry
Lovett-Turner also noted that several defensive investment trusts, such as Personal Assets and Capital Gearing, operate "zero discount mechanisms" through buying back shares at around a 2% discount and issuing at around a 2% premium.
Meanwhile, RIT Capital has been extremely active in buying back shares since late February following its derating.
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"We have seen an increase in buybacks from a wider range of asset classes this year, particularly in infrastructure and renewable energy investment companies, which have moved to meaningful discounts for the first time in their histories, as well as listed private equity funds," added Lovett-Turner.
"Managing balance sheets are a key consideration for these types of funds. Several infrastructure and renewables trusts have flagged specific buybacks based on available cash, whilst others have flagged potential capital returns based realising portions of the portfolio (NextEnergy Solar and Foresight Solar)."
In the private equity sector, Pantheon International released "the boldest plans" with significant £200m commitment to a buyback in the current year and then to use a portion of realisation proceeds for capital returns thereafter.
