Jupiter Merlin’s three highest conviction funds

Findlay Park American, Jupiter Global Value and TwentyFour Dynamic Bond are three of the highest conviction positions held in Jupiter Merlin’s portfolios.

The multi-manager team has detailed three funds that it believes could perform well in the current market climate.

Alastair Irvine, product specialist at Jupiter Merlin, said: “We’re looking at this in the context of a market that ended last year very strongly, went into the beginning of this year equally strongly, then at the end of January and going into February suffered a bout of the collywobbles.”

The global economy still looks healthy and the International Monetary Fund (IMF) are forecasting 3.9 per cent growth this year and next. However, Irvine is worried over the possible negative effects of central banks’ normalising their monetary policies.

Central banks are now focusing on their inflation targets and are no longer using measures such as quantitative easing. Instead, there is a synchronous tightening of monetary policy, he said. Irvine’s worry is that as equity markets have tracked quantitative easing, they may also track this tightening of policy.

“Although we have this very benign backdrop at the moment, if central banks themselves start pushing rates forward more aggressively than they’ve anticipated, then they could potentially start to choke off that future growth.”

Jupiter Merlin’s investment objective is outlined by fund management director Amanda Sillars, who says the goal is to increase the purchasing power of their clients and consistently outperform the benchmark and peer group.

 “Our philosophy and process is to invest our client’s hard-earned savings in the best active managers and the asset classes which are rising. We believe this is an art. Albeit backed by a science,” she said.

In this article, we look at the three highest conviction positions held in Jupiter Merlin’s portfolios.

Findlay Park American

Anthony Kingsley, who runs the £8.2bn Findlay Park American fund, is now the sole chief investment officer of Findlay Park, while the company founder, James Findlay, remains as a board member.

The fund is a value US equity fund with an absolute return approach, allowing it to move throughout the US market.

Performance of fund vs sector and benchmark since 2000

Source: FE Analytics

Over the past 18 years, Findlay Park American has outperformed its benchmark and sector and has posted a return of 671.47 per cent compared with a 215.51 per cent rise in the Russell 1000 in the same period.

Jupiter Merlin particularly like Kingsley because he holds cash reserves, giving himself the flexibility to take advantage of opportunities. The portfolio currently has 15.4 per cent in cash and fixed interest.

Sillars said: “In February, he had 13 per cent cash in that portfolio and he used that pull back as another opportunity to gently increase exposure to financials, industrials, and consumer staples, sectors which should benefit from rising rates and economic growth in the US.”

Findlay Park American has an ongoing charges figure (OCF) of 1.05 per cent and a performance fee of 10 per cent of the outperformance of the benchmark over a margin of 0.5 per cent.

JGF-Jupiter Global Value

The JGF-Jupiter Global Value fund, which is co-managed by Ben Whitmore and Dermot Murphy, currently has £313.4m in assets under management. It invests primarily in equities on an international basis aiming to achieve long-term returns.

Since taking over the fund in 2016, the pair have produced returns of 26.40 per cent, while the sector returned 11.64 per cent and the benchmark gained 10.21 per cent.

Sillars explained that by holding this fund, the Merlin range is able to increase its exposure to cheaper stocks in the market. This is a value-focused fund that takes a disciplinarian and contrarian approach, looking to take advantage of companies trading at a discount to their intrinsic value.

“Matching that with more growth-orientated managers already in the portfolio like Terry Smith and Hugh Yarrow is a really great way of increasing that return,” said Sillars. Its largest holdings include Flow Traders, Ralph Lauren, Pearson, Cisco Systems, Western Union Company, and Barclays

Performance of fund vs sector and benchmark under Whitmore and Murphy

Source: FE Analytics

JGF-Jupiter Global Value has an OCF of 0.91 per cent.

TwentyFour Dynamic Bond

The £1.67bn TwentyFour Dynamic Bond fund is managed by a team of six fund managers including Gary Kirk and Eoin Walsh.

This fund has outperformed its average IA Sterling Strategic Bond peer since its inception in 2010, returning 62.88 per cent compared with 45.33 per cent from the sector.

Performance of fund vs sector and benchmark since launch

Source: FE Analytics

The fund managers meet the senior management of every company before they invest in it. Sillars said: “I think it’s a great example and shows you how they’re using the flexibility within the strategic asset class to the benefit of clients.

“This fund soft closed in 2015. It’s nimble and during the last 18 months it has been adding to emerging market debt, indeed a third of the return last year came from emerging market debt: both sovereign and corporate debt.”

Despite this, the fund is still mostly invested in the UK, where 31.1 per cent is held. Some 29.33 per cent is in Europe and 18.55 per cent is invested in North America.

TwentyFour Dynamic Bond fund has an OCF of 0.77 per cent and has a yield of 4.53 per cent.