InvestmentsJan 18 2017

Best in Class: Merlin is a bright spot in a busy space

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Best in Class: Merlin is a bright spot in a busy space

The multi-asset, multi-manager universe is a busy space. Between the IA’s Flexible and Mixed Investment sectors, you’ve got around 500 options to pick from. But a beacon has long been Jupiter Merlin Balanced, run by industry stalwart John Chatfeild-Roberts (pictured).

It is part of the well-known suite of Jupiter Merlin products, which also includes the more cautious Jupiter Merlin Income and the more aggressive Jupiter Merlin Growth portfolios. However, its excellent track record and strong team make it a core proposition for clients seeking an all-in-one solution in 2017.

And this may be a sensible year to invest through a fund of funds. As 2016 proved, markets can move swiftly following political events and in the coming months we have Donald Trump’s first 100 days in office, assorted European national elections and, possibly, the elusive Article 50 invocation.

Meanwhile, the US rate rise in December suggests 2017 may be a year of monetary policy divergence. Just as the quantitative easing (QE) and low interest rate cycle draws to a close in the US, the European Central Bank has been forced to extend its bond buying. The Bank of Japan has also said it will continue its QE programme.

Fiscal stimulus is also on the cards. Mario Draghi never fails to call for greater government action, Mr Trump campaigned on an infrastructure platform and Philip Hammond’s Autumn Statement set out several projects designed to boost the UK economy.

Between these two approaches – fiscal and monetary – one of the main hazards of the year ahead could be inflation. Central banks will need to strike a balance and there could be more significant ramifications for the bond market in terms of rising yields and falling prices.

Overseeing a portfolio of individual funds for clients in this environment will be especially challenging. You very likely won’t have the resources, analyst teams and manager access that the large groups do, which can help them to respond rapidly to changing conditions. 

Mr Chatfeild-Roberts’ name carries weight in the industry. He and his team are constantly meeting new managers and revisiting existing relationships. They have the expertise to pick up on underlying issues with funds or softer factors that may impact performance, which may not be immediately apparent.

Mr Chatfeild-Roberts also recently stepped down from the Jupiter board to focus fully on running the Merlin range, which I see as a big positive. He also has a history of investing in star managers early in their careers – he was an early supporter of Hugh Yarrow at Evenlode – which is a good example of the kind of value he can add.

Jupiter Merlin Balanced is heavily invested in equities and holds next to nothing in fixed income. It also has an allocation to physical gold, which is a sensible hedge, and a small amount in property as a further diversifier.

With an ongoing charges figure of 1.63 per cent, it is not cheap, but relatively standard for a fund of funds and, in my view, a reasonable cost for an excellent, actively managed portfolio.

Since launch, the team has delivered comparable returns to the FTSE All-Share, but at less than two-thirds the volatility. Surely an attractive proposition for investors in the current climate.

Darius McDermott is managing director at FundCalibre