JPMorgan Global Core Real Assets 24 January 2024
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JPMorgan Global Core Real Assets (JARA) uses an innovative structure to invest in a vast portfolio of real assets spread across the world, all with the aim of providing resilient income and growth. The strategy invests in core assets, meaning those which are of high quality and expected to be relatively stable in value and defensive.
JARA is managed by JPMorgan’s Alternative Solutions Group, and they invest in a number of private, open-ended funds run by internal teams largely for institutional clients. These core allocations are supplemented by a liquid strategy which is invested across REITs, infrastructure- and transport-related listed equities. With the exception of this liquid strategy, the underlying private funds are subject to lock-ups and large minimums so JARA offers access to these strategies to the ordinary investor.
JARA’s NAV has proven relatively resilient over the past few years as the global economy has been rocked by a number of events, as we discuss under Performance. However, it has not been immune from the sell-off in asset prices seen over the past year as interest rate hikes bite. That said, NAV losses have been limited and income generation has remained solid, while the long-term return outlook for real assets now looks particularly attractive after a sell-off, according to JPM’s long-term capital market assumptions for 2024.
The shares now trade on a significant Discount to NAV of 27% after a period in which discounts have widened across the investment trust space. This could arguably add to the attractions for an investor looking now, particularly given the ongoing buyback programme and the continuation vote due next year.
JARA is a unique proposition, which we think could be an excellent sole investment in real assets for an otherwise diversified portfolio. The structure allows the NAV to be exposed to a vast number of over 1,000 individual assets focused in the faster-growing economies of Asia and in the US. Exposure to specific transportation assets, to specific types of infrastructure and to some segments of the real estate market – such as Asian logistics or US residential – is otherwise hard to find, and the overall proposition is a deeply diversified portfolio which we think potentially adds something to a long-term investor’s portfolio.
Despite the diversification, JARA has not been immune to the effects of a period in which interest rates have risen substantially in many key geographies around the world, and this is likely the reason behind the current discount to NAV. We cannot be sure that further falls to asset values will not be booked, particularly in US commercial real estate which is currently under pressure in specific sectors. However, it is striking that the long-term return prospects from real assets have seen the largest mark-up over the past year by JPM’s strategists. Given the potential good entry point at the portfolio level and the wide discount at the share price level, we think an allocation now may reward the brave in the long term.
- JARA offers access to a huge global platform of alternatives, usually restricted to institutions
- Real assets typically offer low correlation to equities or bonds
- Attractive dividend from diversifying sources
- Asset values could see declines if key interest rates remain higher for longer
- Although dollar exposure has fallen, JARA is still heavily exposed to that currency
- Underlying holdings are illiquid, as are the investments in most constituent funds