Table of Contents Cover Publishing details About the author Disclaimer Preface Introduction The basics of investing in funds Plenty of choice What you need for success The fund concept The idea behind funds Diversification and risk The advantages of scale The returns you can expect Points to remember How funds work The importance of detail The range of funds in the UK Unit trusts in more detail The scheme particulars The legal position of fund investors OEICs and unit trusts Dual pricing in action What buyers pay What sellers receive The pricing of OEICs Points to remember Growth or income, or both? General principles Income or growth? Inflation and retirement Capital appreciation has attractions too Timeless truths Points to remember How to pick the best fund managers Keep it simple The qualities you need Learning from experience Finding the best Experience is important Talking to fund managers Assessing people is an art in itself Points to remember What can past performance tell you? Mirror, mirror on the wall A trail of clues Example of BARRA output A short cut to style analysis The dangers in past performance Other interpretation problems Enter the regulators The truth about costs (and index funds) Do costs matter that much? Too little competition on price A more logical state of affairs The fund of funds example What about index funds? The trouble with indices Active managers can win You still have to make decisions Conclusion Points to remember Asset allocation and managing risk What does asset allocation really mean? Don’t be too rigid Keep yourself informed The trouble with weightings Whose risk is it anyway? Are absolute returns the answer? Living with volatility Points to remember Jupiter Merlin in action What the fund does The fund of funds concept Jupiter Merlin Growth Portfolio Fund Holdings as at 31st October 2005 (names of managers in brackets) UK investments Opportunities overseas The potential in Japan Specialist holdings How the fund has changed Points to remember 10 The secrets of success The need for humility The lessons of youth Look at the valuation Think for yourselves Liquidity matters Mistakes we all make Final thoughts Points to remember Glossary Acknowledgements & thanks Appendices What is in the appendices Jupiter Merlin Portfolios, November 2005 Graphs of all the index-tracking unit trusts and OEICs All Jupiter Merlin Growth Portfolio Fund Holdings Publishing details HARRIMAN HOUSE LTD 3A Penns Road Petersfield Hampshire GU32 2EW GREAT BRITAIN Tel: +44 (0)1730 233870 Fax: +44 (0)1730 233880 Email: enquiries@harriman-house.com Website: www.harriman-house.com First published in Great Britain in 2006 Reprinted 2007 This eBook edition 2011 Copyright: John Chatfeild-Roberts and Jupiter Asset Management Limited 2006 Published by Harriman House Ltd In association with Half Moon Publishing Ltd The Old Farm, Cuddersdon Road, Horspath, Oxford, OX33 1HZ Tel: +44 (0)1865 876484 Website: www.intelligent-investor.co.uk The right of John Chatfeild-Roberts to be identified as the author has been asserted in accordance with the Copyright, Design and Patents Act 1988 ISBN 13: 978-0-857191-03-8 British Library Cataloguing in Publication Data A CIP catalogue record for this book can be obtained from the British Library All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publisher This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published without the prior written consent of the Publisher No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading material in this book can be accepted by the Publisher, by the Author, or by the employer of the Author For Doone, Tom and Harry About the author John Chatfeild-Roberts has been analysing and investing in funds professionally for fourteen years He and his team manage the Jupiter Merlin range of funds of funds, for which they have been voted Best Multi-Manager Group of the Year for an unprecedented three years in a row – 2003, 2004 and 2005 After graduating from Durham University in Economics, his early career was spent serving in the Army both in the UK and abroad Before moving to Jupiter, he ran similar operations for Lazard Asset Management and Henderson Administration in the 1990s He is married to Doone They have two children, Tom and Harry, and live in Stilton Cheese country John spends his spare time with the family walking and riding in the countryside, and in the summer, playing cricket Disclaimer Whilst every effort has been made to ensure the accuracy of this publication the publisher, editor, author and author’s employer cannot accept responsibility for any errors, omissions, mis-statements or mistakes “Fundology” is intended for your general information and use In particular, it does not constitute any form of specific advice or recommendation by the publisher, editor, author or author’s employers and is not intended to be relied upon by users in making (or refraining from making) investment decisions Appropriate independent advice should be obtained before making any such decision Appendices What is in the appendices This Appendix gives further details of the style and performance of the main funds that I and my team run at Jupiter It shows the fact sheets about each fund that we produce for distribution to clients, summarising the performance, ranking and holdings of each of the different portfolios Note that the six funds each have different objectives and are managed accordingly It is worth commenting on the fact that each portfolio contains between ten and fifteen funds and that some portfolios contain holdings of the same funds This reflects the fact that a good fund can be put to more than one use Even taking all the portfolios together, however, we need to find no more than 40 or so funds out of the 4,000 plus that are available It really is a case of finding the best, and holding on to them until or unless market conditions change More details about the track records of the individual funds that we own are given in Appendix Three This shows graphs of all the onshore UK index-tracking unit trusts and OEICs available to retail investors, that have been in existence for more than a year Each graph is relative to the total return (i.e dividend reinvested) version of the index the fund is trying to track, and is since the launch of the fund Every single one of them underperforms its chosen index; some by more than others Appendix Three shows graphs of all the current holdings in the Jupiter Merlin Growth Portfolio Fund, discussed in Chapter Nine Each graph is relative to the total return version of its relevant index Jupiter Merlin Portfolios, November 2005 Graphs of all the index-tracking unit trusts and OEICs Source of all graphs: Lipper, total return, GBP, since launch at the beginning of the fixed-price offer period, relative to their respective index, to 30th November 2005 N.B The figure quoted on the right hand side of each graph shows the amount by which each fund has underperformed its benchmark index since launch For example, the St James's Place Fund above returned 5.6% over the period versus 13.2% for the index, underperformance of 7.6% (13.2% minus 5.6%) All Jupiter Merlin Growth Portfolio Fund Holdings Source of all graphs: Lipper, total return, GBP, years or since launch, relative their benchmark index, to 30th November 2005 ... amount of money into the fund, and in exchange buys a number of units in the fund (or shares in the case of OEICs) at the price at which they were valued on the day of purchase A key principle of the. .. which used to be the legal proof of ownership Instead, they will have a copy of the entry in the register that lists their name, the latter being the source of the proof Over the years in less... sellers of the fund than buyers Offer basis The pricing basis of a unit trust when there are more buyers of the fund than sellers What buyers pay The creation price is the price at which the fund