Inflation could near double-digits, warns Chatfeild-Roberts

Inflation could near double digits over the next five years and be the “achilles heel” of the UK economy, Jupiter Asset Management chief investment officer John Chatfeild-Roberts has warned.

The UK consumer prices index fell to 2.5 per cent per cent in August, down 0.1 per cent compared with July.

Chatfeild-Roberts warns that the current quantitive easing programme, which stands at about £375bn, is storing up inflation problems for the future.

“[Over a five-year time frame] you can imagine inflation being towards the double digits,” he says. “I am sure no one wants it. It may be that my five-year time horizon is not long enough, but I see it to be the inevitable outcome.”

He adds: “I am sure that inflation is the potential achilles heel of the UK economy. We are seeing a shift in balance to emerging markets. If you look over the next 100 years the sterling and dollar will lose a lot of purchasing power compared to the renminbi and other emerging market currencies.”

Jupiter last week announced the details of its Merlin Conservative fund, which it plans to launch on 28 September.

The fund, which will sit in the IMA Mixed Investment 0-35 % Shares sector, will invest 16 per cent in UK equities, with exposure to the £9.3bn Invesco Perpetual Income fund and £739m Jupiter UK Special Situations fund.

It will invest a further 18 per cent in other equities, with investment in funds including the £3.5bn M&G Global Dividend, £490m Morgan Stanley Global Brands and £2.3bn Newton Asian Income fund. It will have a 4 per cent holding in gold, through ETF Securities products and a further 1 per cent in cash.

There will also be a 61 per cent holding in fixed interest in through the £349m CG Dollar, £1bn Kames High Yield Bond, £5.6bn M&G Strategic Bond, £242m Jupiter Corporate Bond and the £834m Threadneedle Emerging Market Bond funds.

Chatfeild-Roberts says: “We are adding the fund because there is client demand. It is the sort of fund for people who want to get into the equity market, but are nervous about it.”

The fund, which will carry an annual charge of 1.25 per cent, gained FSA approval in August and is the first addition to the Merlin range in 10 years.