The Odd Couple’s new fund
FUND managers Alastair Gunn and Rhys Petheram couldn’t be more different. Watford-born Gunn started his career in a NatWest bank branch at age 18 before a stock broker friend landed him a job in the City.
Petheram studied finance at Melbourne University and spent three years working as in a pension firm in Australia before coming the UK in 2004.
Gunn is an expert in equities. Petheram’s a fixed income guru. Gunn cycles from home every day. Petheram jumps on the Tube.
Yet together the investment industry’s Odd Couple jointly manage more run more than £1bn savings in the Jupiter High Income and Jupiter Distribution funds. And they’re about to add a third fund to their armoury: Enhanced Distribution.
They don’t sit together in the office – Gunn sits with all the managers and analysts who deal with company shares, and Petheram is likewise surrounded by his peers – but they cross paths at least five times daily to discuss ideas, there is a formal monthly meeting and they attend companies’ meetings together too.
‘But at the end of the day’, says Petheram, ‘If he wants to buy a share then he doesn’t have to get my approval.’
After a tumultuous couple of weeks in the stock market, it is easy to wonder whether it might not be the best time to launch a new fund.
Gunn says: ‘It’s a great time. You want to start when the stock market is at the bottom, unfortunately I don’t think we’ve quite hit that yet. We have been looking around for opportunities for some time, but we can’t invest any money until we get to the office on Monday morning when the fund officially launches.’
Enhanced Distribution will fit into the Mixed Investment 20- 60pc Shares category. That means it can have between 20pc and 60pc of its money in equities, and the rest in fixed income and cash.
Do they compete over who gets the bigger proportion? A quick glance passes between the duo.
Gunn says: ‘Our agreement is the person with the most conviction needs to be accommodated. If Rhys feels that strongly about something then I will sell to make room for that in the fund. There’s no point having an egotistical argument because I want to run more money than him.’
Happily for Gunn, however, apparently right now there are more opportunities in equities than in fixed income. The fund is likely to start with about 55pc of assets in shares.
Now he is interested in insurers such as L&G, Prudential and Esure. With motor premiums down 30pc in just two years and a spike in whiplash claims, he believes the industry is on the brink of change.
Customers’ increasing use of comparison sites to find the best insurance deal is making firms more transparent and competitive.
While Petheram has every faith in his associate’s decisions, he is not afraid to make suggestions.
‘We owned shares in Next and the price doubled. I would keep going over to Alastair everyday saying so the share price is pretty high, do you think we should?’ he laughs. Gunn stuck to his guns and the price continued to increase.
He, too, generally sticks to his own territory. He says: ‘Last year I suggested we invest in Greek government bonds. And Rhys quickly gave me at least half a dozen reasons we should not be buying those. But at least we had the conversation.’
And it is that strategy that has led to strong returns in their other two funds. The High Income fund has returned 53pc over five years, while the more cautious Distribution fund has achieved 33pc in that time and is ranked 2nd of 47 in its fund cate- gory. The new fund, which will sit somewhere between the two in terms of risk, has a lot to live up to.
Gunn says: ‘When we first started the Distribution fund we were designing it for a cautious old lady in Barnsley who wanted a regular monthly income, and the prospect of growing her money but definitely didn’t want to lose any.
‘But there are plenty of people who want to take a bit more risk than that and with three funds in the range now hopefully we will be able to cater for everybody.’ Holly Black is reporter at Money Mail