John Chatfeild-Roberts (pictured) is taking the long view with Jupiter’s Merlin range of multi-manager funds, keeping exposure to Europe and emerging markets low in favour of gold and US equities.
John Chatfeild-Roberts, head of Jupiter’s Merlin range of multi-manager funds, has argued the US economy will not go back into recession for the moment, after US companies’ earnings exceeded expectations in the last quarter. The Merlin portfolios probably had more in US equities than many funds, he said.
‘The only slight downside is arguably that American shares on a long-term basis are not particularly cheap, whereas on a long-term basis European shares do look quite cheap. But one has to be worried about what their earnings are,’ he said.
On Europe, Chatfeild-Roberts is less optimistic, and the funds have low exposure to European ex-UK equities. ‘We have very little money in Europe and that’s been the case for four years,’ he said.
He said the Merlin portfolios have had ‘reasonable’ exposure to Asia ex-Japan for a while, almost entirely through First State Asia Pacific Leaders B fund or the First State Asian Equity Plus fund, managed by Angus Tulloch and his team.
Tulloch is a value investor and Chatfeild-Roberts said his holdings in Tulloch’s funds represented a ‘defensive way of playing Asian equities’.
‘We want exposure to that region but we prefer to do it in a controlled way rather than in a too-aggressive manner. That’s served us well over the years.’
The Merlin portfolios currently have no exposure to China, however.
Waiting for China’s moment
‘In the near term it’s very difficult to predict what will happen in China,’ said Chatfeild-Roberts. ‘In the longer term, it is obvious China is a world power and it will grow economically considerably faster than the developed world. The trick is to try to make money out of that.’
The portfolios may invest again in China, he said, though he would not put a time frame on it.
In contrast, he views Japanese equities favourably. The devastating earthquake and tsunami of 2011 is ‘yesterday’s story’, he said. Instead, the critical issue was whether the Japanese managed to inject some real inflation into the financial system.
‘We think, on balance, they will probably succeed in generating a bit of inflation,’ he said. However, that was a ‘medium conviction’, not a high conviction, he added.
The Merlin portfolios have invested in Japan through three funds: CF Morant Wright Japan, which it has held since 2003, GLG Japan CoreAlpha and Jupiter Japan Income, which has been managed by Simon Somerville since he began at Jupiter.
‘One of the crucial things we have thought for years is that, as important as it is to choose the right places in the world to invest in, you must choose the right people to invest with,’ said Chatfeild-Roberts.
Each of the Merlin portfolios holds gold through the ETF Securities’ Physical Gold ETF. Jupiter does not disclose the size of this holding. Chatfeild-Roberts said it owned the exchange traded fund ‘merely as an insurance policy’, because printing of money by central banks was likely to show up at some stage in inflation figures.
‘We feel one of the ways of protecting clients’ assets from that effective debasement of the currency is to own some physical gold,’ he said.
The Merlin portfolios have little exposure to UK gilts, favouring corporate bonds. On roadshows around the country, Chatfeild-Roberts asked people if they wanted to lend money to the UK government for 10 years. ‘Generally speaking, people say no,’ he said. However, corporate bonds were ‘a slightly different kettle of fish’ because many corporates had used the financial crisis to rebuild their balance sheets, he said.
Pressure on charges
Joel Adams, joint chief executive at Lift-Financial, had this question for Chatfeild-Roberts: ‘With all the downward pressure on fund management fees brought on by lower cost investing options, such as ETFs, are you convinced you can continue to add value to your investors within the current Merlin fee structure?’
Chatfeild-Roberts replied he had spent his entire career running funds on a similar basis, and felt investors were not particularly concerned about the intricacies of what the fund manager did or how the job was set up. However, Merlin was ‘very, very concerned about the outcome’.
He said his job was ‘to generate the best possible outcome for clients after fees’ so they achieved a better result, net of fees, than if they had bought a lower cost vehicle, such as an ETF.
The Merlin portfolios have an initial charge of 5.3% and an annual management charge of 1.5%. The performance figures shown in the graphs below are net of annual charges and assume no initial charge.