This fund was launched at the beginning of June, aimed at investors with a medium- to long-term outlook, seeking income with potential for capital growth. With a target yield of seven per cent, the fund has a wide spectrum of bonds to choose from in terms of appetite to risk, and also has the ability to switch from a conservative to aggressive stance, depending on circumstances.
Manager Ariel Bezalel believes that the major economies will slow down over the next couple of years so there is still potential for some earnings risk. However, he says that ‘Markets are pricing in a high level of default risk for investment-grade bonds from blue-chip companies, and this seems extremely unlikely – in fact we are already seeing financials starting to outperform.’
While Bezalel intends to take positions in high-yield bonds, he will be looking
at defensive sectors and credits that are well protected by a large equity cushion, seeking to place the fund as high up on the capital structure as possible.
Minimum investment: £500 lump sum or monthly saving of £50
Initial charge: 4%
Annual management charge: 1.25%
Contact: For more information, call 020 7314 7600 or visit www.jupiteronline.co.uk
Andrew Merricks says:
Jupiter has a solid reputation when it comes to fixed-interest funds, and the launch of a strategic bond fund should be of interest.
As with many equity funds, managers are finding too tight a remit a hindrance in delivering performance in ever more volatile asset classes, so to be able to ‘go anywhere’ in an asset class, as Jupiter’s literature suggests, should be seen as a positive in helping competent managers to do their job properly.
So far, so good. But, Jupiter’s definition of going anywhere appears slightly peculiar when viewed in the context of what the fund manager is actually saying and doing.
Jupiter says that, at launch, fund manager Ariel Bezalel will aim to position 60 per cent of the portfolio in investment-grade bonds and 40 per cent in high yield. It also states that the fund will have a minimum of 20 per cent in high-yield instruments. This condition seems slightly at odds with ‘going anywhere’, particularly when the manager himself is quoted as saying that ‘compared to the investment-grade market, high-yield corporate bonds are still looking expensive to me’.
The forecast exposure at launch of 40 per cent of the fund to an asset class that appears expensive seems to be strategically questionable. Does the strategy of the
fund allow for investment in gilts and index-linked gilts? It’s unclear.
The target yield of seven per cent is achievable in this market, and I don’t doubt the ability of Bezalel to produce this. As he points out, investment-grade bonds are currently offering potential not seen for many years, but it would be more comforting if he was allowed to truly go anywhere in search of quality yield rather than have limits placed upon him.
The annual management charge of 1.25 per cent is fair, a...
Copyright Vitesse Media
Read more from whatinvestment.co.uk
Recommendations