Call me when it’s time to buy, Philip Gibbs

John Kenchington

Last week we broke the news that Jupiter’s Philip Gibbs was handing over his Absolute Return fund to recent hire James Clunie on September 1 and retiring in October 2014.

For me, too many fund managers hide behind a benchmark index, taking only relative bets such as being a percentage point ‘overweight’ this and a basis point ‘underweight’ that.

That way, if they get it wrong their funds’ returns will never deviate too significantly from the market – a surefire way to prevent any career-threatening failures, but bringing only mediocre returns.

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Mr Gibbs is not one of those managers. From June 1997 to June 2010, when his protégé Guy de Blonay became a co-manager, Mr Gibbs’s Financial Opportunities fund gained 792 per cent, compared with a FTSE Financials index gain of 38 per cent.

The return was made in spite of the Asian financial crisis of 1997, the Russian default of 1998, the early 2000s developed-world economic slump, the bursting of the dotcom bubble in 2001, and the catastrophic credit crunch of 2007 onwards.

In 2008 he famously switched 80 per cent of the fund into cash to protect investors from plunging global equity markets, before swinging back heavily into equities later in the year to capture the full force of the 2009 market rallies. One seriously lucrative trade.

But when in 2009 he launched Absolute Return, the spectacular returns were not to be repeated. He retained ultra-bearish low levels of market exposure in the belief markets were too risky.

The fund dipped into slight losses in July 2010 before finally finding a touch of momentum in December 2011, but fleetingly. Overall since launch it has gained less than 2 per cent, as global equities gained closer to 50 per cent.

Hargreaves Lansdown’s research chief Mark Dampier last week said the fund was the most disappointing he had ever seen, saying that Mr Gibbs had been “caught in the headlights thinking the world was going to collapse”.

But I just don’t see him cowering in his office afraid to hit the big red ‘risk’ button. No, he has shown time and time again through his career that he isn’t afraid to make big moves.

I suspect he is simply staunchly negative towards the macroeconomic environment – i.e. the great quantitative easing experiment – and just doesn’t see a case for hitting the button yet. He isn’t about to buy in if he thinks it could damage his investors.

Maybe he’s right, and the great quantitative crisis of the mid 2010s is just around the corner. Only time will tell.

For now my message to Philip is this: When you do decide the time to buy has come, remember to drop me a line will you?

John Kenchington is editor of Investment Adviser