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Hold or fold? Jupiter Merlin Income portfolio

What Citywire says:

John Chatfeild-Roberts’ long-term returns place his multi-manager Jupiter Merlin Income portfolio at the top of the Cautious Managed sector.

Over 10 years to the end of July he returned 65.6%, ranking the fund first in the sector over that time period.

His three and five-year performance is almost as impressive: returns of 3.6% and 38.2% place him 13/85 and 6/51 respectively.

Over recent months, however, performance has dipped, with the fund dropping out of the top quartile over 12 and three months, and this month Chatfeild-Roberts lost his Citywire A-rating.

However, the fund was able to afford investors some protection during the financial meltdown last autumn.

‘We went into the financial crisis in very good shape, having increased our defensive exposure through 2007 by upping weights to gilts and gold and holding the more defensive fund managers, such as Neil Woodford at Invesco,’ explains Chatfeild-Roberts.

The fund missed the very early stages of the March rally and Chatfeild-Roberts has since added exposure to the more aggressive, high beta funds in the Corporate Bond sector but still maintains a defensive position.

He believes: ‘The US consumer remains key and yet the likelihood is that they will continue saving more and spending less. This all points to an anaemic environment for companies.

What the advisers say:

Steve Buttercase

IFA, Sense Financial Solutions

This coming recovery is all about who makes the right call on bonds versus stocks in their portfolio. Bonds have been both praised and vilified in equal measure recently in the absence of clear information as to which financial institutions have been swimming naked before the tide went out. That uncertainty has fuelled both rampant speculation and over-cautious inaction in response to spreads and yields in the realms of fantasy at times.

I think this fund has it about right, and when the full implications of the global crunch finally appear there will probably be some frantic repositioning. Equity rallies after a bear market can sustain for longer than expected partly from relief and partly from cash returning to the market. The cycle is usually the smart fund managers and investors first, then the momentum traders and finally the herd. This is a fund that places itself in the leading group by selecting managers that should show the way and I believe it has that right.

The track record, the selection of managers and my own personal views on the market’s probable development over the coming months make this fund a hold for me. However, investors should be prepared for it to lag behind if the recovery becomes an over-heated bull charge next year – which it may very well do.

verdict HOLD

Lee Robertson

Director, Investment Quorum

The £950 million Jupiter Merlin Income portfolio, an income –oriented fund of funds, has been managed by John Chatfeild-Roberts for about 10 years. While technically the fund can also invest in closed-ended funds, it has stuck to the open-ended variety of which the biggest holdings typically include funds such as Invesco Perpetual Income, Artemis Income, and First Asian Equity Plus as well as from time to time ETFs such as Physical Gold.  

It aims to achieve a high and rising income, and until 2007 payouts had doubled over the previous 10 years, according to Jupiter. As a Cautious Managed sector constituent, the fund is limited to having a maximum of 60% in equities across the 10 or so funds in which it typically invests. Chatfeild-Roberts appears to remain optimistic that income-oriented UK equity funds will be able to maintain or even increase their distributions despite former high-yielding banks ‘definitely going through a tricky time’.

The long-term performance on this fund has been excellent, although one could argue that it has struggled a little of late. If we were holders of this fund or had clients who were we would continue to recommend a hold. The only reason we don’t hold it is that we tend to shy away from multi-manager funds in most instances.

verdict HOLD

Twist

Henderson Multi-Manager Income & Growth. AA-rated Bill McQuaker beats the Jupiter fund over three and five years.

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