‘We bought into gold – and it’s up 50pc so far this year’

To say “absolute return” funds have not been flavour of the month is an understatement. These funds are meant to provide stable gains no matter what the market conditions, but many have not lived up to that promise in recent years.

Yet some absolute return funds, such as the £682m Brooks Macdonald Defensive Capital, are bucking this trend. Its manager, Jonathan Gumpel, tells Telegraph Money why bad funds deserve what they get, why music is a good investment and how he persuades banks to create dream assets from scratch.

It should fit most types of investing. If you have a defensive portfolio, we might be one of the better picks in there. If you’re aggressive, we’re quite a good way to become a bit more defensive. We fit in anywhere in-between as well. A lot of our peers are focused either on stocks and shares or on bonds.

We invest in bonds, but will include stocks and shares and alternative assets, so we’ve got a good mix. We are a very diversified fund, and have the potential to be more diversified than others.

We also seem to think differently to other people. If we can’t find bonds we want to own, we get investment banks to create them for us. For example, we said we wanted exposure to US inflation, but not exposure to rising bond yields. An investment bank made us a “structured note” to do that. We tend to own bonds and other assets rather than stocks and shares. Where we want exposure to companies, we like “convertibles” – bonds or preference shares that can be swapped for stocks.

We like good returns for the risk taken. We also spread risk by picking diversified assets. We have a history of getting things more right than wrong, but when we do get it wrong we don’t want to get hurt too much.

We don’t tend to own risky companies, or companies with high debt, or those that are too expensive.

We are more about growth at a reasonable price. Risky assets are pretty much the opposite of what we want. We like companies with solid underlying assets, rather than a promise of future earnings. If something goes wrong, we want something we can claim on, rather than promises. We really like the Sony convertible bond and the company is high-quality, large and growing.

There are limited means of getting exposure to long-term growth, but we think the music industry, interestingly, is one of them. Sony is big in electronics, music, gaming – so many different markets. It’s a proper company and has a good convertible bond. It is also priced in yen, which often goes up in periods of market risk.

Obviously, we will take only a small position in an asset like that, but I wanted to have a position that would, if gold did well, really give us bang for our buck. It was a hedge against political risk, and it worked.

We held Summit Properties, a German commercial property investment company, until it was taken private and we sold it.

So we took a loss, but then it relisted on the stock exchange two or three years later at five times the price. Missing out on that was one of my biggest regrets. We probably No. I think where absolute return funds don’t add value, any negativity is justified. No one ever buys a fund because of the sector; they buy it because it’s a good fund in its own right.

In any sector there are good and bad funds. It’s a case of, within each sector, investors needing to pick the best. A good absolute return fund provides consistent, good returns for the risk taken.

I get a salary and a bonus that is linked to my overall performance and the performance of the fund.

I do. I have a significant amount in there.

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