The Flexible Macro fund aims to generate consistent risk-adjusted returns across the market cycle by investing in securities uncorrelated to traditional assets and that stand to benefit from macroeconomic themes and secular trends.
The team, led by Sheikh (pictured), will use a top-down approach to invest in equities, fixed income and financial derivatives, including in emerging markets. It will target a total return in excess of cash, as measured by one-month Euribor, over a three-year rolling period.
Ongoing charges figures (OCFs) for the fund will range between 0.61% and 1.47% for the retail class (L).
Return target comes into question
But Shore Financial Planning director Ben Yearsley noted the performance target of one-month Euribor was likely to mean “not exactly stellar returns”. The one-month Euribor rate is currently -0.409%.
He said: “Wow, trying to beat one-month Euribor rates. When did a meaningful return mean beating one-month cash?”
However, the press release announcing the fund said the Sheikh believes he can achieve a return of cash plus 5% over a three-to-five-year period with volatility around half that of equities.
“If that’s what he thinks he can achieve then have that as the target, not one-month Euribor,” Yearsley added.
Downside protection for the right price
AJ Bell head of active portfolios Ryan Hughes noted the fund is essentially Sheikh’s version of the JP Morgan Global Macro Opportunities fund he ran before joining Jupiter.
He said: “The performance target of above cash is not stretching but investors invariably expect these types of strategies to provide downside protection in challenging conditions, so it will be vital that the strategy delivers on these expectations.”
Hughes added it is also vital for Jupiter to price the strategy as low as possible. “If returns are lower, as Sheikh alludes to, and the target is to beat cash, low charges will be key.”
Chelsea Financial Services managing director Darius McDermott said he was looking at Sheikh’s aspirational return target, rather than the Euribor target, adding: “It has a decent return target of cash plus 5% over the mid term. It’s one I would watch for now.”
Uncorrelated returns attractive
Sheikh said the need for liquid strategies that provide a return that is uncorrelated with traditional asset classes remains strong.
He added: “Unlike many investors we do not forecast a more volatile environment going forward, but we do believe total returns are going to be lower given current starting valuations in equities and especially in fixed income.”
Jupiter chief investment officer Stephen Pearson said: “In today’s market environment, generating meaningful returns without excessive risk will require an active, unconstrained and flexible approach. Talib has a history of strong performance in this space and today’s launch demonstrates our commitment to providing a range of products to suit our clients’ needs.”
Flexible Macro is the second fund managed by Sheikh and the multi-asset team since he joined Jupiter from JP Morgan Asset Management in June 2018. The first fund, Flexible Income – a sub-fund of the Jupiter Global fund – was rolled out in September last year.
Jupiter has been expanded its multi-asset team this year. In January, Mark Richards joined as a multi-asset strategist from JP Morgan and more recently Matthew Morgan joined from Blackrock as product specialist, joining assistant fund manager Joseph Chapman.