In his first interview since the announcement, Chatfeild-Roberts acknowledged that the funds had a difficult 2013 and 2014, but pointed out that for much of the past year the team has been on the right side of most trades. Instead, he said, the decision was an evolutionary one.
“I am still on the main board of Jupiter, I am still a significant shareholder and I still think I have something to add from that point of view, but if you look at life, it is a relay race. Each generation should have its chance to direct whether it is governments, companies, charities, or whatever. I love running the Merlin funds and I am quite happy to let someone else take up the baton on the management side.”
Asked how the firm reached the decision, Chatfeild-Roberts said: “Stephen Pearson was running a long/short fund in 2011 or so and it was obvious he was getting bored, it was a relatively small fund and he needed a new challenge. We had a chat and he said he would quite like to move onto the management side, so we gave him the role of deputy CIO. And, it was quite obvious to me that here was a guy with the energy, drive the ability to go further. And, I think it is fantastic that he is prepared to take on that mantle.”
Given the current market environment, there has of course been speculation that part of the decision was as a result of, on the management side, the time taken up by the growing regulatory burden and, on the fund side, the difficulties posed by the current market that has been distorted by massive injections of liquidity into the system.
But, while Chatfeild Roberts admits that there is indeed a lot more risk in the system as a result of this money printing, he disagrees that the role of managing the Merlin funds is any harder than it has been in the past.
“The basic building blocks are the same. We are still trying to find the best people. I think the principles are the same, there are just not very many good people, but there are those that can consistently outperform the industry and our job remains to find them,” he said.
And, in this, he expects that relinquishing the CIO role should give him a bit more time to do just that, at least in the short term.
“On a day to day basis I am looking forward to my diary being freed up,” he said, in answer to a question about what the change will actually mean, “ but it will probably fill back up in no time at all! I expect it is one of those things that only time will tell.”
Another area where time will likely have the final say, he believes, is the growing focus on volatility at the expense of returns over the long term.
Asked whether or not the growing prominance of outcome-based funds had changed the way the Merlin team thinks about things, he said: “It is well known that humans hate losing money more than they like making it. As I see it, our job is to make investors money over time. You might just as well leave your money in the bank rather than have a low volatility, low return fund in my book.”
He added: “We have low rates at the moment, and if you are in that frame of mind you shouldn’t be taking on equity risk. Most people who try to minimise volatility, they tend to buy insurance one way or the other. And insurance costs money, which detracts from the return.”