Emma Wall: Hello and welcome to the Morningstar series, "Why Should I Invest with You." I'm Emma Wall, and here with today is John Chatfeild-Roberts, manager of the Jupiter Merlin Growth Fund.
Hello, John.
John Chatfeild-Roberts: Emma, nice to see you.
Wall: So, of course, you run a suite of Merlin funds, which are appropriate for different investors depending on their risk appetite. But today I wanted to focus on the growth fund, and one interesting element that I found is, I think a number of investors when they think growth, they think of emerging markets. But this fund in particular has a larger proportion in developed markets. Why is that?
Chatfeild-Roberts: I think it's erroneous to think that stock market growth and economic growth go hand-in-hand. There isn’t a one-to-one correlation. And yes, emerging markets economically tend to grow faster than developed markets. But that doesn’t mean to say that you're going to make more money out of emerging markets. For instance, Latin America this year one of the funds that we own has lost 14% and that’s in a year when most developed markets have made you pretty much double-digit returns.
Wall: I think perhaps people would say the developed markets have done so well since the credit crisis, of course, that is there more to have, particularly, I know you've got a large allocation to the U.S., has that got more to run?
Chatfeild-Roberts: Well, it's interesting that the U.S. does look quite expensive on the number of measures including the 10-year Shiller P/E ratio. We do think it is an economy that has the sort of entrepreneurial spirit, and people are there to make money and the managers that we've got in our portfolios are value investors by and large. So we're looking for people who are actually looking at the downside as well as the upside, and we've made good money actually.
Wall: So this isn’t necessarily the same sort of U.S. exposure that you may have had five years ago?
Chatfeild-Roberts: That would actually be probably an erroneous answer if I said. It's completely different. There are some differences, but we have actually moved away from a couple of Gross-type managers. It's all about buying people really, but your point about the valuation is well made.
Wall: And is it perhaps also a case of not just that you do continue to see fantastic opportunities in the U.S. and in developed market. But also as you hinted with Latin America fund, there is a lot of negative macro backdrop to investing in emerging markets at the moment. China looks very uncertain, Russia looks very uncertain. Of the BRICs, perhaps only India is continuing to offer stock market growth?
Chatfeild-Roberts: Well, it's interesting you say that, because if you look at China from the economics side of life, yes, it's been growing more slowly, and they've been very clear that the government is trying to reduce the overbuilding property that sort of thing. But it also looks like, they're trying to put, if you like, a rocket under the stock market. There is talk of equitizing the debt. So very recently, the Chinese stock market has been really going up very fast. If you look at the number of brokerage accounts that have been opened in China, it sort of makes one a bit nervous really.
Wall: Too many people flocking to the market.
Chatfeild-Roberts: Well, it looks more like a casino and less like serious investors. But in this world, you have to take risk on both to make returns.
Wall: But that doesn’t change your stance, is it? Because your stance is a longer term one. Speculation isn’t really what the Merlin suite of funds is about?
Chatfeild-Roberts: Well, what we are trying to do is make money for our investors over and above the rate of growth of prices and that sort of thing over the long term. We've been running Merlin funds at Jupiter since 2001, and in fact, we were running them earlier under different guys, Lazard, from 1997. And actually, we've done okay over that time period.
But it is – the race is never finished. There is always tomorrow and you shouldn’t rest on your laurels. But actually trying to go for the next big thing, it can be a mistake. You want to compound on a gentle basis.
Wall: John, thank you very much.
Chatfeild-Roberts: Thank you, Emma.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
