Fund Focus - Jupiter Absolute Return Fund
Philip Gibbs Manager of Jupiters Aboslute Return Fund gives his views on the global economic recovery.
What prompted you to launch a retail absolute return fund?
We believe there is demand for products that aim to produce a positive return regardless of market conditions, especially in this uncertain environment. I managed an offshore long/short hedge fund for ten years and have an established investment approach, covering a wide variety of regions, market sectors and asset types. Changes in retail fund regulation have made it possible for us at Jupiter to launch a product which provides UK retail investors with access to my approach to absolute return investing that was previously limited to investors in the offshore fund. This is also quite a different product to the Jupiter Financial Opportunities unit trust fund that I have managed since 1997, which has a financial sector bias.
How do you decide which geographic regions and asset types to invest in?
The Fund seeks to exploit opportunities across geographic regions and asset types. My investment decisions start with an assessment of dominant market and economic conditions. I particularly look for anomalies between economic trends and how they are priced by stock, bond and currency markets. Then I analyse individual stocks and securities which I believe will best realise my macro economic views. This process encompasses global capital markets, a fact reflected in the present international make-up of the portfolio.
Can you give an example of a stock you have recently included within your portfolio and why?
The stock market is presently too volatile to justify significant positive or negative exposure, in my view. I am therefore being careful not to expose the Fund to too much equity risk. This includes a small selection of businesses with exposure to Far Eastern growth.
Are there any investment themes are you currently exploring within the fund?
Amid a period of heightened macro economic imbalances, we are carefully invested. We are attracted to the high yield offered by the corporate bonds of a US tobacco company. We also believe that Japan’s government bond yields appear too low in relation to the country’s sovereign debt position and hold what we consider to be a low risk position which will benefit from an increase in yields. Our equities exposure is modest and geared towards the structural growth and healthier public and private sector balance sheets of the Far East. Despite a lot of economic uncertainty, low stock valuations make it a difficult market to be aggressively short (i.e. looking to profit from the fall in value of stocks or indices). Short positions include businesses operating in Europe where economies and the banking sector are under considerable pressure.
How do you see the current state of the global economic recovery?
Growing fiscal restraint in the EU combined with mixed economic signals in the US and China has created some uncertainty over the outlook for global growth. Southern Europe remains the most troubled global economic region. Despite the bail-out package announced in May, the region’s economy faces a severe contraction and there remains a risk of significant public and private sector defaults. US economic data has become more mixed as the year has progressed. Manufacturing is recovering well, but unemployment remains stubbornly high, with the private sector still cautious about the recovery. Stronger public and private sector balance sheets in emerging markets make their long term growth outlook more attractive. While we have some concerns about a property correction in China, we believe the authorities will be careful not to undermine economic growth. A slowdown in global growth should keep interest rates lower for longer, increasing the relative attractiveness of businesses with good quality earnings yields. However, slower growth will make earnings harder to defend. For fund managers, it is a period in which to be carefully invested.
NOTEThe use of derivatives to speculate as to the direction of a market index, currency or share will move can cause short term periods of volatility. The Fund may incur losses greater than its initial investment into derivative contracts (although unit holders will not incur liabilities beyond their initial investment). The fund is able to gain market exposure in excess of its net asset value which can increase or decrease the value of units to a greater extent than would have occurred had no additional market exposure beyond the net asset value had been in place. The fund value is unlikely to increase and decrease in line with the respective markets it invests into. Further information is contained within the Key Features (incorporating Simplified Prospectus). Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM) are both authorised and regulated by the Financial Services Authority and their registered address is 1 Grosvenor Place London SW1X 7JJ. They are both subsidiaries of Jupiter Investment Management Group Limited and the group is collectively known as "Jupiter”. The above commentary represents the views of the Fund Manager at the time of preparation and may be subject to change and this is particularly likely during periods of rapidly changing market circumstances. Their views are not necessarily those of Jupiter and should not be interpreted as investment advice. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.