Growth is a value call for Jupiter

The Jupiter Merlin Growth Fund has long sold out of its British small cap exposure and has a bias towards value-orientated managers. But it is heavily weighted to emerging markets growth.Despite its name, the £738m Jupiter Merlin Growth portfolio has a bias towards value-orientated managers. However, it is heavily exposed to the growth of non-Western economies.

The Jupiter Merlin Growth portfolio, managed by Jupiter’s fund of funds team, is one of the biggest funds in the Active Managed sector, according to Morningstar. Launched in September 1992, it consists of 18 funds, which John Chatfeild-Roberts, head of Jupiter’s fund of funds team, says is more than it normally holds. He expects it to return to 15 funds over the next six months.

The fund, which sold out of its British small cap exposure over a year ago, has a bias towards value rather than growth styles of investing.

“We’re more value than anything,” says Chatfeild-Roberts. “Neil Woodford is a value manager, Anthony Bolton has a value bias, James Findlay is value, First State Asia is certainly value, Tim Guinness is value and Elena [Shaftan] is keen on value. We’ve made sure we don’t have much exposure to UK small caps.”

However, the portfolio does hold Findlay Park’s US Smaller Companies fund. Chatfeild-Roberts explains that it is equivalent to a large cap fund in Britain. In fact it is one of the fund’s longestheld positions – since the fund’s launch in 1998, and first bought in 1992 when James Findlay was at F&C.

As well as being underweight small cap companies, the Growth portfolio is avoiding Western financials. It does hold the Jupiter Financial Opportunities fund, managed by Philip Gibbs, but Chatfeild-Roberts explains that there is no exposure to mainstream Western financials within the portfolio.

The fund has also, for several years, avoided exposure to direct property. In November’s overview, however, Chatfeild-Roberts pointed to the possibility of good buying opportunities in property if prices were to drop substantially. Now he says such opportunities are unlikely to arise until 2009.

The main overweight position in the portfolio is emerging markets. In fact, a third of the portfolio has always been held in non-Western markets, Chatfeild-Roberts says.

Emerging market funds in the portfolio include the Findlay Park Latin America fund and the Jupiter Emerging Europe Opportunities fund.

Chatfeild-Roberts is doubtful that emerging markets can fully decouple from the American economy. Their own domestic economies are not enough, he says. “Some of these countries are more dependent on the US economy [than] some people might imagine. If the American economy continues to go down, some of these emerging market economies will find it more difficult than they have over the last four to five years.”

The Jupiter Merlin Growth portfolio ranks seventh out of 33 funds in the IMA Active Managed sector over three years to January 7, according to Morningstar.

The fund returned 55.3% against a sector average of 48.6%. Over one year the fund is ranked 10th out of 36 funds, returning 7.69% compared with an average sector return of 5.6%.