Moneywise First 50 Funds interview: Ariel Bezalel, Jupiter Strategic Bond

by Brean Horne from interactive investor |

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Ariel Bezalel, head of strategy, fixed income at Jupiter Asset Management, speaks to Brean Horne about the Jupiter Strategic Bond fund and offers his top tips for beginner investors

What is the fund?

We call it a ‘go anywhere’ fund. We are very active across developed and emerging markets globally. We also invest in a range of assets from AAA stocks all the way down to distressed opportunities on occasion as well [debt that is very likely to be paid back and debt that is riskier].

The fund takes macroeconomic factors into consideration. Then we try to figure out how that landscape will evolve. At least 70% of the fund is invested in global fixed-interest securities denominated in Sterling or hedged back to Sterling [to protect against currency fluctuations].

Up to 30% of the fund is invested in other assets: shares of companies based globally, open-ended funds (including funds managed by Jupiter), cash and liquid assets that can be quickly converted to cash.

Why should people invest in this fund?

Our performance over the long and short term has been strong, which has been helped by our understanding of macroeconomic issues.

We consider inflation, deflation and interest rates alongside other economic data to decide how much risk to take. So, typically, if we are feeling quite bullish about the economic outlook, we may have a higher exposure to corporate credit, and in turn higher yields.

If we are taking a cautious approach, we will favour investment-grade paper or high-quality government bond paper. We have a lot of tools at our disposal and are active users of credit default swaps, which helps mitigate risk in the fund. Sometimes we use instruments such as taking FX bets on currencies and US Treasuries to hedge our risk.

What gets you out of bed in the morning?

I love my job and feel very fortunate to be able to do what I do. Each day brings a host of opportunities and challenges. Developing strategies to best position the fund and identify pitfalls that might catch you out is fascinating. It is almost like an ongoing chess game, and I thoroughly enjoy it.

What was your first investment?

I have always had an interest in stock markets and how bonds work, and had a go at trading my own portfolio.

I started at Jupiter in a back-office role in June 1997 and soon joined the fixed-income desk and absolutely loved it. The high-yield market in Europe was just kicking off – it was a really interesting time for investing.

What has been your best investment decision?

Launching the Jupiter Strategic Bond Fund was a very successful venture. The most profitable long-term decision we have made for the portfolio is having a longer duration than our peer group for much of the last decade. We have a deep understanding of a variety of macro factors including the accumulation of debt in the developed world and the impact that has on government bond yields in this region.

What has been your worst investment decision?

Increasing our exposure to India a few ago presented some difficulties for the fund. We had almost 10% of the fund in a mixture of Indian corporate bonds and government bonds. I overestimated how far the country’s corporate governance infrastructure had come.

Unfortunately, we found that there was a high level of corruption and very little regard for stakeholders in some cases. Luckily, we were able to pull our investments before any long-lasting damage was done.  

What is the most important lesson you have learnt?

To acknowledge when you have made a bad call and cut your losses. This can be tricky at times, but once you have done it and moved on, it can be very therapeutic.

It is also essential to maintain humility and never assume that you know everything.

Commercial markets are extremely unpredictable and good performance over a certain period does not equate to your investments being unflappable fowever. Take the coronavirus crisis, for example. While our fund was well positioned for the economic impact, no one could have predicted the extent of the lockdown measures put into place.

We did have to evaluate the companies we held and cut the ones we did not think would survive in this environment.

What is your top tip for beginner investors?

I would recommend reading as much as you can about investments and the economy. This could be through news publications or journals – for example, I read the Financial Times and Wall Street Journal every day.

There are lots of excellent books out there too. I am currently

re-reading Lords of Finance by Liaquat Ahamed, which is a great book and very relevant today.

Taking in as many financial ideas and perspectives across history is very helpful and will give you a good grounding before taking your first steps.

As Henry Ford once said: “The farther you look back, the farther you can look ahead.” 

Jupiter Strategic Bond stats

Launch: 02/06/08

Fund size: £4129.03m

Charge: 0.73%

Yield: 3%

Date: 30/4/20

Source: FE Trustnet

The manager behind the fund

Ariel Bezalel started his career at Jupiter, has been a member of its fixed-interest and multi-asset team since 1998 and a fund manager since 2000. He currently manages the Jupiter Strategic Bond fund (Unit Trust) and the Jupiter Dynamic Bond fund (SICAV). Ariel has a degree in economics from Middlesex University.

Sector breakdown
 

Source: FE Trustnet 31/04/2020

Discrete performance of the fund over five years (%)

Period

0-12 m

12-24 m

24-36 m

36-48 m

48-60 m

Jupiter Strategic Bond I Acc

4.3

4.6

0.5

7.5

2.4

IA Sterling Strategic Bond

2.3

2.7

1.3

7.7

0.6

Source: FE Trustnet 31/04/2020

Top 10 holdings

AUSTRALIAN GOVT LOANS (CMNWLTH OF) 3.25%     

5.02%

UNITED STATES OF AMER TREAS NOTES 2.25%

4.45%

UNITED STATES OF AMER TREAS BONDS 2.25%

3.85%

AUSTRALIAN GOVT LOANS (CMNWLTH OF) 3.75%

3.83%

US TREASURY NOTES 2.75%

3.55%

US TREASURY NOTES 2.00%

3.19%

UNITED STATES OF AMER TREAS BILLS 3%

2.55%

US TREASURY NOTES 1.62%

2.37%

VIRGIN MEDIA INC 5.5%

1.72%

UNITED STATES OF AMER TREAS BILLS 2.65%

1.63%

Source: FE Trustnet 31/04/2020

 

 

This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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