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Jupiter's Chatfeild-Roberts: my defensive fund stalwarts
John Chatfeild-Roberts, fund of funds head at Jupiter, shares his views on the best defensive funds to weather the crisis.
Despite the bleak outlook, with markets weighed down by the painful realisation across Western economies that it's high time to pay back some debt, investors shouldn't give up hope.
That's the message from Jupiter's chief investment officer and Merlin fund of funds head John Chatfeild-Roberts, who said it's important not to get 'too bearish', as opportunities would emerge for patient investors.
Although all Merlin portfolios are positioned to avoid Western sovereign debt, Chatfeild-Roberts said opportunities would arise because of the wave of central bank cash that's being pumped into the global financial system.
However, he also warned that inflation could bite once the liquidity injection was withdrawn, and said the process might not be fast enough to avoid inflation in the short term.
A painful adjustment
Fellow Jupiter Merlin colleague Algy Smith-Maxwell was clear that in his view Europe will remain in serious trouble for some time to come despite the injection of central bank cash: ‘Nothing has changed. We are still going through this period of structural change. Consumers are having to adapt their lifestyles to having less income, and we have a prolonged and painful readjustment in our hands.
However, he went on to caution against blanket pessimism: ‘Don’t get too bearish, because the most important positive here is liquidity. When central banks are in the mood that they are currently in they will continue to surprise us, and the markets at that very time are most fearful.’
Chatfeild-Roberts, meanwhile, said that rising inflation at home and abroad could lead to heightened geo-political risks: ‘Our view is that when you have inflation and income inequality in a deleveraging world, you are going to have a heady cocktail for political instability. We are very mindful that we have the perfect cocktail not just in Europe but also in the Middle East.
‘The huge levels of liquidity that have been pumped into the global system could create an inflation problem. Since 2006 the largest central banks have increased their balance sheets from 5.5 trillion to 15 trillion dollars.
‘When this punchbowl is taken away it will be very painful, and our suspicion is that the politicians won’t allow the central bankers to withdraw the liquidity fast enough for it not to create an inflationary problem.’
Taking a long-term view
On the New Year rally, Algy Smith-Maxwell said: ‘We are participating in the rally we have just had. It may have flattened out for a while, but essentially as investors we have to take the long-term view.
‘Things don’t look remarkably cheap at the moment, but they certainly don’t look wildly expensive. We are only prepared to buy things for the long term, and patience is absolutely crucial.
‘We are structurally defensive and are avoiding sovereign debt. We can get more aggressive should we want to, but [markets] have travelled quite a long way and seasonally, this is the time to mind your eye and be patient.'
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In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
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