JPM fund manager Talib Sheikh says volatility gives opportunities

While market volatility fuels the debate between investing in equities or cash, Talib Sheikh, co-fund manager of the JPM Cautious Total Return Fund explains his outlook, current asset allocation and how investors can potentially preserve capital even during uncertain markets.

The JPM Cautious Total Return Fund is currently the fastest selling fund in the cautious managed sector due to the fund managers' macro, top-down investment approach and flexible asset allocation, which allows it to react to shifting market conditions and preserve capital.

Talib Sheikh explains, 'The nature of the fund means we are able to invest in a wide range of asset classes, moving flexibly between diversified sources of return. This is great for investors as we can react quickly and effectively to protect their money whatever the market does. However, the fund is much more than a market timing fund - it does not just take asset class bets but also intra country, stock specific and intra bond bets. It will also take up sector and thematic positions within the portfolio.'

Sheikh is cautiously optimistic on the global economic outlook for the year, seeing pockets of value particularly in some regional equity markets. However he stresses that while we remain in the middle of one of the worst credit crises ever, large macro allocations will not necessarily pay off.

Sheikh adds: 'We anticipate that any recession in the US should be short-lived and shallow, the Federal Reserve's aggressive pre-emptive action is encouraging and we anticipate that they will continue to do everything possible to prevent a long-term recession or depression including further interest rate cuts. However I am more bearish on the outlook for the UK.

'The Bank of England has been less pre-emptive than the Federal Reserve in its actions to protect growth, and remains more concerned with controlling inflation, therefore, we are more positive about gilts and less positive about UK equities.'

The flexible structure of a total return fund allows the fund's total equity exposure to range between zero and 40 per cent. The JPM Cautious Total Return fund is currently positioned towards the lower end of this range. Sheikh believes equities will outperform cash over the next year, and cash will outperform bonds: 'Equities look reasonably valued and we are biased to increase weightings.'

Sheikh continues: 'Hong Kong is very attractive at the moment. The island's property companies are looking particularly good due to the fact that the currency is linked to the dollar, meaning US rate cuts are making money cheaper in Hong Kong. We have also been building positions in US large caps, which have been heavily sold and are now offering attractive value.'

JPMorgan Asset Management is part of JPMorgan Chase and is a global asset managemer providing world-class investment to clients. With USD1.2trn in assets under management as at December 31st 2007 and offices in 40 locations around the world, JPMorgan Asset Management offers global coverage with a strong local market presence, and leadership positions in most asset classes.

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