Jupiter is preparing to add a cautious product to John Chatfeild-Roberts' £7bn Merlin range, Investment Week understands.
The Jupiter Merlin Cautious portfolio will be the fifth addition to Chatfeild-Roberts, Algy Smith-Maxwell and Peter Lawery’s multi-manager range, when it comes to market towards the end of the third quarter. The fund will have the lowest risk profile of all the offerings in the suite, with less of a focus on equities and more in fixed income.
At present, the Income product is the most cautious of the Merlin funds, with an upper limit of 60% in equity funds and the remainder of its allocation in bonds.
Merlin Cautious is expected to list in the IMA Mixed Investment 0-35% Shares sector, where it will sit alongside Alastair Gunn and Rhys Petheram’s £257m Distribution fund.
Funds in the sector can have up to 35% in equities, and must have at least 45% in bonds or cash. A number of fund groups have said they are considering launching portfolios into the new sector, the launch of which was initially delayed due to the small number of funds suitable for the peer group.
Henderson recently shifted Paul Craig and Bill McQuaker’s Multi-Manager Diversified fund into the sector, while Architas CIO Caspar Rock said he is “studying it closely” with a view to moving the Architas MM Conservative portfolio.
With its greater focus on fixed income, the new fund may reflect some of the bond fund picks across other Merlin portfolios. Bond market exposure in the Income fund comes from funds including Ariel Bezalel’s Jupiter Strategic Bond, Kames High Yield Bond, and Threadneedle Emerging Market Bond.
According to their latest investment update, the Jupiter trio’s view on the bond market has seen them look to Western corporate debt over sovereign paper because there are yields of 4% to 5% in some cases and healthier balance sheets.
“The contraction in 10-year yields on Japanese, German, and UK sovereign debt is a clear sign of the stresses being felt across financial markets,” said Chatfeild-Roberts.
“Who would have dreamt that a UK 10-year gilt could yield as little as 1.52% (as at 4 June 2012)?
This is in stark contrast to the yields demanded on Spanish,
Portuguese and Greek 10-year debt. These examples highlight succinctly the extent of the north/south divide in Europe.”
Proposals for the new Jupiter fund have been sent to the FSA and are pending approval, Investment Week understands. Jupiter declined to comment.
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