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Jupiter launches 'macro income' fund

The former co-manager of JPM Global Macro Opportunities has launched a new income fund at Jupiter
September 27, 2018

Jupiter has launched a new income fund to be run by new arrival Talib Sheikh using the macroeconomic-driven asset allocation philosophy he became known for at JPMorgan Asset Management.

Jupiter Flexible Income Fund (LU1846715651) will invest across a range of assets, including equities, bonds, derivatives and other income-generating investments such as mortgage-backed securities and convertible bonds. The fund aims to grow capital over a three to five-year period, while yielding between 4 and 6 per cent. 

Mr Sheikh recently joined Jupiter following a near-20-year career at JPMorgan running similar strategies, namely the JPM Multi-Asset Income Fund (GB00B4N20S86). He also ran popular absolute return fund JPM Global Macro Opportunities (GB00B4WKYF80) and the JPM Global Macro Balanced Fund (GB00B235HC61). Both used a similar style, but aim to preserve capital in all market situations rather than provide income and growth.

The new fund will provide quarterly income using around 400 investments, but at least 70 per cent of the fund will be in equities, bonds or equity-like investments such as call or put options – which involve making short term calls on markets falling or rising and can be used to enhance income.

Mr Sheikh's approach has always been creating an investment strategy by analysing the macroeconomic environment. At Jupiter he will combine this with stock selection ideas provided by Jupiter's equity and bond analysts and other fund managers. 

The fund will have an ongoing charge of 0.8 per cent if bought via a platform. It is not yet available on mainstream platforms but is expected to be in the coming months, Jupiter said. If bought directly from Jupiter, the ongoing charge rises to 1.47 per cent.

Analysts' views were mixed on the fund launch. While Mr Sheikh's record at JPMorgan made him very popular, his strategy has always required significant resource and input from other analysts and stockpickers.

Adrian Lowcock, head of personal investing at Willis Owen, said he would want to see how well the team at Jupiter and the fund perform before considering it as a core holding, although he says it has the potential to be a good option to diversify income given its relatively different approach.

“Given [the manager’s] experience of the macro economic environment the fund takes a different approach to many other income funds out there,” he said. “One area of caution is that Talib Sheikh’s research resources are not likely to be as extensive as they were at JPMorgan. But given Jupiter’s open structure he has many peers to liaise with."

Darius McDermott, managing director of FundCalibre, said the fund’s target yield was attractive and that its diversification should help to manage risk. He added: “Talib Sheikh had a very good track record at JPMorgan, so I would certainly have this fund in my ‘one to watch’ pile. He will also be well supported by the existing fixed-income team at Jupiter.”

While taking more than 400 positions, the fund is expected to have significant exposure to US high-yield bonds – an area Mr Sheikh said he finds particularly appealing for income. However, the fund does have limits on how much exposure it will have to different areas of the bond market, including an 80 per cent cap on high-yield bonds, 20 per cent in non-rated bonds, 20 per cent in asset-backed and/or mortgage-backed securities and 10 per cent in contingent convertible bonds.

Mr Sheikh said valuations look relatively attractive in the US high-yield market, with yields of around 6.5 per cent, and he expects the US economy to continue to grow over the next two to three years, preventing defaults rising substantially.

He added: "There is a clear need for alternative [income] options for investors and I believe that the flexibility provided by Jupiter’s investment culture should prove an ideal environment for a dynamic, nimble portfolio like this to flourish.”