Miles Geldard, manager of JPMorgan’s £20m Cautious Total Return Fund, says it is important to make clear to investors that the fund’s aim is to achieve risk-adjusted returns.

“We’re focused on risk-adjusted returns. We don’t focus on quantitative returns. The fund is extremely diverse,” Mr Geldard says. “We’re insistent about trying to explain the nature of what we do to people who want to keep their money with us.”

Total return funds such as Mr Geldard’s aim to make money in both bull and bear markets. The passage of Ucits III, the European Union’s new directive on collective investments, opens the door for fund managers of total return funds to invest in a wider range of assets.

In addition to shares and bonds, managers may now invest in cash, money market instruments, financial derivatives and units in other investment funds. JPMorgan’s fund invests primarily in fixed-income securities, convertible bonds, shares and short-term securities. Its annual return target is cash plus 3 per cent.

Unlike other total return funds, Mr Geldard and Talib Sheikh, his co-manager, shy away from taking top-down bets on asset allocations. “We are very focused on individual securities,” Mr Geldard says.

The fund is quite diversified. Its top holdings include equity stakes of less than
2 per cent in BAA, British Aerospace, Vodafone, ING, Compal Electronics, Scottish & Southern Energy and Holcim. Up to 40 per cent of the fund is dedicated to equities and the remainder to fixed-income and convertible bonds.

At the moment, Mr Geldard is reviewing some of the fund’s equity holdings amid the booming market. “While we consider equities to be attractive on a long-term basis, on a short-term one there seems to be a slight euphoria. So we’re a bit cautious.”

Mr Geldard is bullish on Japan and the commodities market. About 6.2 per cent of the fund’s equity holdings are in Japan, while just 4 per cent are in North American stocks. “There is a recognition among international investors that Japan has turned the corner.”

He cautions that Japan attracts “a lot of hot money”. He says: “You have to be careful of air pockets and short-term washouts there, but the long-term outlook is still compelling.”

The momentum in the commodities market has increased in the past year, in his opinion. The bright spot has been that the price of commodities has been rising while demand has remained strong, especially in China and India.

“There’s a lot of inelastic demand in the market,” Mr Geldard says. “And there’s so much more demand from the emerging economies.”

Energy is another sector he is keen on, as he sees an increase in global usage. “There’s been a massive increase in the consumption of it,” he says.

The fund is up 3.66 per cent in the past three months against a 5.5 per cent return by the cautious managed benchmark, according to data from Standard & Poor’s. In the past six months, the fund reported a 5.38 per cent return while the same benchmark posted a 7 per cent rise.

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