Unlike many managers who have been calling the “unique” opportunity in corporate bonds, the head of the Merlin fund of fund range is not so bullish, claiming the returns will not be “exciting” and pointing to “significant risks”.
He says: “You have to remember that a lot of corporate bond funds lost a lot of money last year, as much as many equity funds, so you need to take a very close look at what is behind the yield they are offering. I would be very cautious of those funds that have a heavy financials’ weighting, particularly lower-quality bank debt.”
Chatfeild Roberts is closing in on 12 years at Jupiter, having taken on the funds at Lazards in May 1997. Back then, the funds stood at £50m and have grown to £2.4bn across the four portfolios, which he runs with his team of Peter Lawery and Algy Maxwell-Smith.
Despite admitting making a mistake of going more optimistic on the East in 2008, Chatfeild Roberts and his team clocked up another year of strong performance on the multi-manager range, returning top-quartile performance for three of the four funds. Having invested during the rally following Bear Stearns, the team decided to take money off the table in May before getting involved in September.
He says: “After markets corrected in September, we started investing again which was a bit too soon but fortunately we chose the right fund managers, such as Angus Tulloch, James Findlay and Neil Woodford, and we outperformed as a result. This serves to prove that choosing the right funds is as important as having the right asset allocation overview.”
Having invested in a bear market since the end of 2007, Chatfeild-Roberts says the team has had a deliberate strategy in two respects – staying away from areas that have delivered returns through leveraged investments, such as property and private equity, as well as steering clear of sterling across the fund range, which he says at its lowest ebb for as long as he can remember.
He says: “What you have to do in such an environment is to avoid illiquid investments – those that are illiquid already or that could become illiquid, which could effectively mean anything outside blue chips.
“You also have to avoid expensive assets, understand who else owns the assets you do hold and remember that everything has a cycle so you know that somewhere there is something that will benefit from the current environment. You do get significant rallies in bear markets and so there are opportunities for the swift to make money.”
Chatfeild-Roberts says that although the average recession last two years, the golden question facing the UK economy is whether we are now set for a depression, namely a fall in GDP of 10 per cent.
“We can look back and see some clues but no one really knows. Protectionism was one of the keys to the depression of the 1930s and I think it is one of the biggest threats now. The G7 have pledged to avoid protectionism but there are still risks. If we do see it rearing its ugly head, it would be very bad news indeed.”
One area that Chatfeild-Roberts is still in favour of is gold, having originally bought the ETF securities physical gold in February 2008 and consistently adding to it.
He says: “We still like gold, as we have for the past year, but there is another call coming. The tricky thing, of course, is precisely when to move and what to buy. Various parts of the equity market are starting to look fair value, although not rock- bottom cheap. While the economic environment remains cloudy, we are happy to sit on our hands and wait for some news that gives us some conviction about the outlook.”
Chatfeild-Roberts believe the argument for multi-manager will again be shown by this latest bear market, as it was by the dotcom bubble earlier in the decade, with IFAs choosing to outsource and focus on client relationships as opposed to working on asset allocation and individual fund selection.
With the FTSE below 4,000 for the past week, Chatfeild-Roberts says his message to advisers at this time is simple.
“Do not to try to time markets as it is difficult to get right consistently. There are still opportunities to make money even in these market conditions. Investors should view further weak periods in markets as opportunities to accumulate investments.”