Chatfeild-Roberts urges caution over complex ‘fad’ funds

22 July 2010

John Chatfeild-Roberts, CIO of Jupiter and head of the group’s £4.6bn multi-manager range, has urged investors to go back to basics and avoid being tempted into complex products promising unrealistic returns. In a poignant message to the asset management community, Chatfeild-Roberts says the industry as a whole needs to be more “honest and transparent” about the products it is promoting and ensure investors fully understand all of the underlying strategies coming to market. Chatfeild-Roberts says he understands all fund groups would like to sell products that never fall in value, are not volatile and carry no risk, but such products “simply do not exist”. The manager says: “The parts of the industry promoting products arguably considered to be perfection are doing people a disservice. “You have to be realistic as a consumer and as a provider. You have to clearly explain what the risks are. If there is a guarantee, for example, and we do not have any guaranteed products, you have to be very clear who is backing that guarantee and what would happen if the guarantor had a problem. “People will always be coming up with complex products, but I hope not too many people are sucked into them. There will always be investors who buy a product they do not understand, but arguably they should not. However hard the FSA tries, from an investor point of view, caveat emptor is a pretty good rule.” Chatfeild-Roberts also warns investors not to rush into ‘fad’ funds, as evidence shows many products launch when their asset class reaches a peak. “One of the sad aspects of the investment management world is that often when you raise a lot of money, it is not necessarily the best time to be investing in that area,” he says. “We have had a couple of emerging market phases, if you go back to the early 1990s. In the long term they have been alright, but in the short term you definitely had an investor base that was less than delighted. “We launched a technology fund back in 2000, but that was under a different regime. Since then, we have managed to launch products that did not necessarily take a lot of money on day one, but have built up a good track record.” Absolute Return, one of the top-selling sectors for retail investors this year, is one such area where Chatfeild-Roberts expresses some caution. “The interesting thing about absolute return is that if we had a return of inflation, these funds might not necessarily remain as fashionable,” he says. “If it is a deflationary environment, these strategies might do well, but if it is inflationary then they might lag.” While investor sentiment has recently been hit by issues such as the European debt crisis, Chatfeild-Roberts believes long-term investors will be well served by active equity management. “At the end of the day, I am a believer in equities. If investors can cope with the near-term volatility and look far enough out, I think they will do well,” he says. “At the moment, people are worried about deflation, and you would think at some stage we are going to see the opposite: people worried about inflation. I genuinely do believe actively managed equities will be good investments. “Whenever you invest there is always uncertainty. As an investor, you need to work out what your time horizon is, what your risk appetite is and you need to use common sense.” Published by IFAonline