Many investors will need no introduction to Philip Gibbs. In our opinion he is one of the finest fund managers in the UK and is well known for managing the Jupiter Financial Opportunities Fund. Jupiter is now launching two new funds under his stewardship. The Jupiter International Financials Fund which we feature in this review, and the Jupiter Absolute Return Fund.
The Jupiter International Financials Fund will be similar to the existing Jupiter Financial Opportunities Fund, with the goal to deliver long term capital growth through a concentrated portfolio investing in the financial sector.
Where this fund differs is its flexibility to invest more internationally and make use of sophisticated investment techniques, for example shorting (please see below for an explanation). While these techniques provide the capacity to enhance returns over the long term when used well, they are entirely dependent on the skills of the manager to make the right calls and so do present an additional investment risk to the fund. Philip Gibbs will use such methods in an attempt to provide some cushioning in falling markets.
While the fund is small and nimble in size, this will allow Philip Gibbs to invest a greater proportion in smaller financial companies. He can also invest in corporate bonds issued by companies in the financial sector and if he is feeling extremely cautious the fund has the capacity to hold a large amount in cash.
Philip Gibbs has built a reputation for timing markets and taking bold decisions although there are no guarantees he will get it right every time. When the financial crisis caused share prices to plummet, he had already increased the existing fund's cash and bond exposure helping to shelter the fund from the worst of the falls. He has since bought back into financial shares hoping to capture some of the bounce in the market. His shrewd judgement has led to spectacular returns although past performance is not a reliable guide to the future.
Jupiter has also recently announced that Guy de Blonay, who was highly regarded for managing the New Star Global Financials Fund is joining Jupiter next year to work alongside Philip Gibbs. We believe the managers have complementary styles and their exchange of ideas should prove positive for investors.
Investors should note that a positive return is not guaranteed, and the Jupiter International Financials Fund carries a performance fee - see the Key Features for more information. Although we believe that Philip Gibbs's skills mean the fund has the potential to be a good long term performer, its similarity to the existing Financial Opportunities Fund and its relatively high charges mean it is not currently part of the Wealth 150, our list of favourite funds in each sector.
Key features of the Jupiter International Financials Fund
Jupiter International Financials Fund Prospectus
Traditionally investors buy assets they believe will rise in value. Shorting is different.
The principle is that the fund manager actually sells shares they don't own. This in effect means he owes the buyer the shares. The buyer agrees they will not take delivery of the shares for, say, six months and the fund manager hopes that by then the share price will have fallen. After six months the fund manager purchases the shares in the market and passes them on to his buyer. The difference between the two prices is the profit or loss. For example:
1. Fund manager sells short 10,000 shares at £2 each = £20,000
2. Purchase these shares six months later at 80p each = £8,000
3. Profit = £12,000
In this example had the share price risen by the same amount, it would have cost the manager more to purchase the shares than they made from selling them and they would have made a £12,000 loss. There are many ways of effecting this investment strategy and managers may short by entering into contracts with a broker and not actually take delivery of the shares. Therefore this is not an exact description of how it happens, and ignores transaction and other costs, but it hopefully explains the principle.
The Jupiter International Financials Fund will be similar to the existing Jupiter Financial Opportunities Fund, with the goal to deliver long term capital growth through a concentrated portfolio investing in the financial sector.
Where this fund differs is its flexibility to invest more internationally and make use of sophisticated investment techniques, for example shorting (please see below for an explanation). While these techniques provide the capacity to enhance returns over the long term when used well, they are entirely dependent on the skills of the manager to make the right calls and so do present an additional investment risk to the fund. Philip Gibbs will use such methods in an attempt to provide some cushioning in falling markets.
While the fund is small and nimble in size, this will allow Philip Gibbs to invest a greater proportion in smaller financial companies. He can also invest in corporate bonds issued by companies in the financial sector and if he is feeling extremely cautious the fund has the capacity to hold a large amount in cash.
Philip Gibbs has built a reputation for timing markets and taking bold decisions although there are no guarantees he will get it right every time. When the financial crisis caused share prices to plummet, he had already increased the existing fund's cash and bond exposure helping to shelter the fund from the worst of the falls. He has since bought back into financial shares hoping to capture some of the bounce in the market. His shrewd judgement has led to spectacular returns although past performance is not a reliable guide to the future.
Jupiter has also recently announced that Guy de Blonay, who was highly regarded for managing the New Star Global Financials Fund is joining Jupiter next year to work alongside Philip Gibbs. We believe the managers have complementary styles and their exchange of ideas should prove positive for investors.
Investors should note that a positive return is not guaranteed, and the Jupiter International Financials Fund carries a performance fee - see the Key Features for more information. Although we believe that Philip Gibbs's skills mean the fund has the potential to be a good long term performer, its similarity to the existing Financial Opportunities Fund and its relatively high charges mean it is not currently part of the Wealth 150, our list of favourite funds in each sector.
Key features of the Jupiter International Financials Fund
Jupiter International Financials Fund Prospectus
Shorting - an explanation
Traditionally investors buy assets they believe will rise in value. Shorting is different.
The principle is that the fund manager actually sells shares they don't own. This in effect means he owes the buyer the shares. The buyer agrees they will not take delivery of the shares for, say, six months and the fund manager hopes that by then the share price will have fallen. After six months the fund manager purchases the shares in the market and passes them on to his buyer. The difference between the two prices is the profit or loss. For example:
1. Fund manager sells short 10,000 shares at £2 each = £20,000
2. Purchase these shares six months later at 80p each = £8,000
3. Profit = £12,000
In this example had the share price risen by the same amount, it would have cost the manager more to purchase the shares than they made from selling them and they would have made a £12,000 loss. There are many ways of effecting this investment strategy and managers may short by entering into contracts with a broker and not actually take delivery of the shares. Therefore this is not an exact description of how it happens, and ignores transaction and other costs, but it hopefully explains the principle.
