The Jupiter Merlin multi-manager team is slowly bringing its bond weightings down to the “absolute minimum” and increasing exposure to equities as they
make a better inflation hedge than bonds.
Jupiter multi-managers Algy Smith-Maxwell and Peter Lawery say the real rise in the cost of living is even higher than CPI and RPI rates. As a result, even index-linked bonds cannot protect against inflation.
Lawery says: “The problem with index-linked is it has its inflation protected against the official measure of inflation. Does index-linked protect your capital and income against the real cost of living, which I think is much higher than CPI and RPI currently have you believe it is? Obviously it does not protect you against that.
“We are just letting the bond weighting come down to its absolute minimum and getting the equity weighting up to its maximum over time. It has not been an explicit sell of a huge amount of bonds.”
The Jupiter Merlin multi-manager team runs over £9bn across its five portfolios. According to the April factsheets, the £4.7bn Merlin Income fund currently has 34.5 per cent of its exposure in fixed income while the £1.6bn Merlin Balanced and £18m Merlin Conservative portfolios have fixed income exposures of 13.6 and 59.1 per cent respectively.
Smith-Maxwell does stress that some bonds are “better placed” against the economic climate. However, he points out that bonds are returning a negative real yield and also describes cash as a “terrible place to be” when looking at real yields excluding CPI.