‘Small companies are great – as long as you can sell’
For the past two decades John Chatfeild-Roberts has run the Jupiter Merlin range of multimanager funds, which invest in a range of portfolios run by other managers. There are five funds in the Merlin range, including the £2.9bn Merlin Income Portfolio.
Mr Chatfeild-Roberts tells us how he discovers talented new fund managers and shares his views on one of the industry’s most controversial issues: fees. funding is withdrawn properly.
We would have bought smaller companies and emerging markets a year ago, but they are very illiquid and we try to manage the portfolio to be bulletproof – we need to be able to sell assets in difficult times. We also need to be able to entrust cash to managers who are best placed to buy in those times when prices are attractive.
John ChatfeildRoberts oversees £7bn at Jupiter. He tells Laura Suter how he identifies good fund managers
We have about 35 investments across the five portfolios in the Merlin range, with some overlap between the funds. In the Income portfolio we invest in about 12 or 13 funds, while in the Balanced portfolio we have 18 or 19.
We want to be relatively concentrated, because if you invest in eight funds and they each have on average 50 stocks, you end up with 400 stocks – although of course there is some overlap between them.
CV: John Chatfeild-Roberts
at Henderson. He was appointed Jupiter’s chief investment officer in 2010, but stood down from this role five years later to focus on the funds. No, I think with investment trusts the liquidity is pretty thin. I think it’s possibly fine as an individual investor, but if we’re going to have hundreds of millions in a trust and want to get out, we’re stuck. Yes, we have sold out of Woodford entirely, but whenever we sell we never comment on the reasons.
We have switched the money into Evenlode Income, which we have high hopes for (see box, right). They would include Angus Tulloch, James Findlay and Neil Woodford. We invested in Tulloch (First State Asia Pacific) in 1992 or 1993, and the Merlin funds were already invested in Woodford, who was then working at Invesco, when I took over in 1997.
Unfortunately, it is hard to find data that goes back that far, but I do know that we bought Findlay Park American when it launched in 1998 and it was $10. Now the units are worth $104.86. I think it was called Australian Natural Resources. Fortunately we didn’t buy very much, but it was a fund that invested in small mining stocks based mostly in Australia.
We lived to tell the tale, but definitely did not cover ourselves in glory. I learnt three lessons: that small companies are fine until Absolutely. I own Merlin Balanced, which suits my risk profile, as it is mostly in shares but has got a little bit in bonds. I have a significant amount in it. I think people should invest in what they manage. We are endlessly asked about this. We have beaten down the charges of most of the funds in the portfolio, apart from Findlay Park, which offers no discounts to anyone.
But ultimately it is a value judgment: we will pay more for a fund that is much better and will deliver better returns.
I think that as a manager if you can’t deliver decent performance after fees over a decent time period you should shut up shop and go home. We first invested in May 2014, when the fund was roughly £50m in size. The fact it was a small fund – and that no one else was much investing in it – was definitely a bonus.
We were looking for an edge over rivals, and that means finding managers others have overlooked. We had come across Hugh Yarrow (near right with Evenlode chief executive Ben Peters) when he was working at Rathbones, but we subsequently lost touch with him – so unfortunately we missed the first five years of his fund.
You get a feel for people who are competitive and hard-working, who really care about investors and who have what it takes.
You don’t need to be intellectual to be a good fund manager but you have to have a certain quality – and over time you can recognise this. Evenlode’s team is young and so we think they have a very good long run at it. They have also indicated that they will restrict the fund size, which we think is important to maintain performance. Investment styles go in and out of fashion and their approach will not always be in fashion. But while we have got central banks continuing to print money there is mass distortion in the markets. Growth for companies is very hard to come by. Evenlode’s style, which is “growth at a reasonable price”, seeks to identify assets at prices cheaper than the average; companies with good balance sheets and companies that are able to continue growing. However, we’re aware that nothing ever goes up in a straight line, either.