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Adviser Fund Index: Jumping Jupiter

As banks helped bring the global economy to its knees, financial stocks have over the past year lost their status as dividend deliverers and some became pariahs of the equity world.

Yet one of the most successful funds in the Adviser Fund Index is Jupiter financial opportunities, which. according to Financial Express, returned 11.37 per cent over the 12 months to April 6. It features in all three AFI portfolios – aggressive, cautious and balanced.

Its fellow specialist financials funds underperformed the specialist sector average drop of -21.04 per cent over the same period. New Star’s global financials fund lost 36.37 per cent, Swip financial lost 39.76 per cent, and JP Morgan global financials lost 45.4 per cent.

James Davies, the investment research manager at Chartwell and an AFI panellist, says the Jupiter vehicle “has barely been an equity fund.” According to Jupiter, financial opportunities held 67.32 per cent in cash at the end of 2008.

Davies says that the fund’s “trustees might take a dim view of all that cash” but says of its manager, Philip Gibbs: “If he has preserved the wealth for his investors, then that is a great job.”

More broadly, given the crisis, how do advisers look at exp- osure to financials when they consider a fund?

According to Mick Gilligan, the head of research at Killik and another panellist, time horizons are crucial. “Managers are moving in and out of bank stocks quickly because they are not out of the woods yet.”

There is “good money to be made if you are trading the banks freely because there has been a lot of volatility,” agrees Sam Sibley, a portfolio manager at Beckett Invest.

Panellists Sibley and Tim Cockerill, the head of research at Rowan, cite Richard Buxton’s Schroder UK alpha plus – which also features in all three AFI indices – as an example of successful short-term trading.

In the three months to April 6, it lost 0.36 per cent against its sector’s 7.43 per cent loss. In an update, Buxton said Barclays and Lloyds had been among the portfolio’s strongest performers since the beginning of March.

According to Sibley, bond managers are looking “selectively” at banks. However, Davies notes cautionary tales such as that of Old Mutual corporate bond, which lost 34.56 per cent over the 12 months to April 6, having “made some bad decisions in terms of bank debt”.

Cockerill notes the sector is far broader than just banking, but adds that “of late, stocks such as Legal & General have had a very difficult time.” In this climate, “A large financials’ exposure suggests a lot of risk.”

Davies argues that financials are an essential part of any portfolio, “Because they are an important part of our econ- omy and you want to benefit from any rally. As long as the fund manager has a good investment rationale, I would cert- ainly consider it.”


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