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Jupiter’s Clunie warns investors must risk drawdowns to get returns
by James Phillipps on Oct 29, 2013 at 12:53
Clunie, who took the reins on the fund in September, said if investors want a fund with no risk then they should expect a negative return.
‘If interest rates are 10% I can be market neutral and give you 10%, but at this level the kind of return you’d get would be minus 0.5%. Cash will give you 0.5% and then there are the fees on top,’ he said.
‘I try to take some risk and eke out returns. I am willing to lose a bit of money to get a sensible return. If you promise no drawdowns you will get a negative return.’
He said his previous fund, the Swip UK Flexible Strategy , delivered market returns but with one third of the risk of the market. The net equity exposure in the Jupiter fund will be lower – around 25% compared to 33% in the Swip fund – which he said was due to higher current stock valuations.
‘Equity market risk is what Japan and Western policymakers want us to take, which they hope will create a wealth effect that will cascade down the economy,’ he said.
‘It seems sensible to take a bit of that, and I prefer to play it through companies paying good dividends, which is a way of picking up my 4-7% return. I am comfortable taking 25% equity market risk in the net element of the fund.
‘I’ve been able to go up in a down year; it can be done. If you aim for low to moderate returns in a choppy environment that is a good result but if you aim for more you can die trying. It can work beautifully but you can also have double digit down years.’
Although Clunie made his name as a long/short UK equity manager, he also had a spell as head of global equities at Aberdeen Asset Management and while the equity component of the fund will be primarily UK-focused initially, this will become more global over time.
He stressed the fund will remain a multi-asset vehicle, adding that despite his previous funds having an equity bias, he has in the past held fixed income.
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