"As the significant amount of capital invested in low or
zero yielding assets looks for alternative homes, the
demand for equities has not surprisingly been strong,
stimulated by central banks who remain concerned
and cautious about removing the ‘punchbowl’.
Inevitably higher valuations imply lower margins of
safety and consequently the market’s vulnerability to
shocks is greater. With the world recovery still fragile
and reliant to a large extent on policy support, it is not
hard to envisage markets having to deal with such
shocks in the coming year and indeed they were felt
during January. Early in 2014 investors have become
increasingly concerned on a number of fronts: these
include signs of a slow-down in the Chinese
economy, emerging market turmoil in response to the
timing of the Federal Reserve’s tapering, doubts as to
whether ‘Abenomics’ in Japan will succeed,
disappointing recent US economic data and the risk of
deflation and economic stagnation in Europe. Lastly it
is difficult to forecast with conviction the
consequences of the massive money printing
experiment of the past few years."
"We have been active in managing our currency
exposure, initially capitalising on Sterling’s weakness
by bringing our exposure to minimal levels, only to
increase these levels materially when we saw early
signs of a UK revival. We concentrated the vast
majority of our non-Sterling exposure into the US
Dollar, and therefore avoided the fallout that ‘tapering’
induced on many of the emerging market currencies.
"
"With interest rates held artificially low, we have also
expanded our credit and absolute return strategies to
ensure we are both enhancing and diversifying our
sources of returns. This initiative is of particular
interest at a time when we negotiated £400 million of
new borrowing facilities at favourable rates, which we
intend to deploy into such strategies. We consider the
risk-adjusted returns to be favourable in enabling us to
earn a reasonable margin of profit, both in supporting
our portfolio returns and helping to offset our costs"
Annual report with the rest of the letter
http://ritcap.hsprod.investis.com/static/cms/2/2/9/4/9/6/6/8/1/6/binary/4156527451/65342600.pdf 
Comments
Regards,
Ted
http://www.bloomberg.com/news/print/2014-03-07/canada-forces-railways-to-ship-grains-to-clear-backlog.html