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Fund Profile

JPMorgan UK Smaller Companies 07 August 2019


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan UK Smaller Companies. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

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JPMorgan Smaller Companies (JMI) aims to give investors access to fast-growing, innovative smaller companies that often have their own structural growth drivers, making them less directly linked to the performance of the overall UK economy.

Georgina Brittain has managed this trust for more than 20 years and was joined by Katen Patel six years ago. The team uses a bottom-up stock picking approach to take advantage of the inefficiencies in the small-cap market that offer a diverse range of alpha-generating opportunities. The team uses both quantitative and fundamental analysis to find companies that exhibit quality, momentum and value characteristics, creating a diverse portfolio of 88 holdings. The largest sector overweights come from the media (6.3%), leisure goods (6.2%) and financial services (3.9%) sectors. At the other end of the spectrum, the trust has little exposure to support services (-3.1%), travel and leisure (-2.9%) and pharma and biotech (-2.7%) relative to the benchmark.

Returns over the long term have been impressive for the trust, which has outperformed the benchmark in eight of the past ten calendar years. Over a five-year period, the trust has generated NAV total returns of 55.1%, once more beating the benchmark’s return of 29.6%, as well as the AIC and IA peer groups, which returned 51% and 53.3% respectively. More recently, the trust’s performance has been a tale of two halves. The trust was hit particularly hard during the fourth quarter of 2018, losing close to 20% NAV total returns. Since then the trust has bounced back, returning NAV total returns of 19.3%, double the benchmark returns of 9.9% and considerably more than the AIC peer group (12.8%) and the IA peer group (12.1%).

Alongside capital appreciation, the trust offers investors a reasonable level of income. Currently the trust yields 2.4% and the dividend has increased by 23.7% over the past five years. Nevertheless, the trust has had a stubborn discount since the European Union membership referendum in 2016 and over the past year the trust has traded, on average, at a discount of a little under 15%. Currently the discount sits at 14%, as at 26 Jul 19.

Kepler View

JMI offers investors the chance to invest in some of the most innovative and exciting companies that the UK has to offer. The case for smaller companies as a long-term investment is extremely compelling, and the manager’s clear, repeatable process makes the trust an attractive way to take advantage of this, in our view.

The trust’s current discount of 14% is one of the widest in the sector and there are multiple trusts with considerably worse performance figures trading at narrower discounts. We believe this could therefore provide an extra impetus behind the share price when sentiment improves towards UK small caps, which could benefit investors who take a long-term view and invest on this attractive discount.

bull bear
Wide discount even relative to worse performing peers High levels of gearing can see the trust amplify volatility, as we saw in Q4 of 2018
Strong track record over the long term relative to the benchmark and peers Stubborn discount due to continued uncertainty surrounding the UK
Highly experienced fund manager with two decades' experience on the trust Dividends are variable to the trust is unlikely to appeal to income-seekers
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Fund History

25 Jan 2024 Fund Analysis
JMI’s proposed combination with JMF will offer investors a range of potential benefits…
10 Jan 2024 Definitely maybe
Fund flows and discounts may shed some light on a once-in-a-generation opportunity…
13 Jul 2023 Video interview with JMI Manager Georgina Brittain
We talk valuations, M&A and the attractions of UK small caps...
25 Apr 2023 Fund Analysis
Macro concerns have knocked JMI to a discount, despite the managers’ strong long-term performance…
13 Apr 2023 Far from the madding crowd
Smaller nimble companies, both public and private, may be best placed to navigate the current environment…
06 Apr 2023 Fallen Kingdom?
Since the UK was described as a ‘Jurassic Park’ stock market, it has outperformed. Is this a new age for the stock market..?
18 Jan 2023 Fortune favours the brave
Our research suggests a recession has already been priced into small cap trusts, but risks abound...
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
06 Jul 2022 Fund Analysis
JMI’s widening discount may be an attractive entry point into the best-performing UK small-cap trust over the long term…
22 Jun 2022 Spider's web
We outline our new quantitative system for mapping the crucial performance characteristics of investment trusts…
16 Feb 2022 Perfectly formed
Our research suggests that investment trusts really are a better way to gain exposure to smaller companies…
05 Jan 2022 Kepler’s top-rated trusts for 2022
We unveil the winners of our ratings for 2022 in the Growth, Income & Growth and Alternative Income categories…
13 Oct 2021 Results analysis: JPMorgan UK Smaller Companies
JMI has built on its excellent track record, taking a balanced approach to a dynamic asset class…
08 Jul 2021 London Calling
UK equities represent a ‘once in a generation’ opportunity according to the managers who joined us at our event last week…
07 Jul 2021 Slides and Audio: JPMorgan Smaller Companies
Download the presentation and listen to the audio from our 'Cool Britannia' Summer conference on 01 July...
07 Jul 2021 Slides and Audio: Roundtable - Small is beautiful
Download the presentation and listen to the audio from our second roundtable discussion with Dan Whitestone, Georgina Brittain and Judith MacKenzie...
23 Jun 2021 Time to back Britain?
After a challenging period for the United Kingdom, we wonder if it could be the most exciting market on a five-year view…
21 May 2021 Fund Analysis
JMI has a strong long-term track record of outperformance...
25 Mar 2021 Results analysis: JPMorgan Smaller Companies
JMI continues to be a compelling proposition for investors even on a tighter discount, after releasing a strong set of half-year results this morning…
06 Jan 2021 This time next year Rodney...
We review the performance of the team’s ‘top picks’ for 2020 – including some proper plonkers – and place our bets for the year ahead…
23 Dec 2020 Fund Analysis
One of the strongest performing trusts in 2019, we look at JMI and the portfolios continued outperformance of the benchmark and peers…
21 Jul 2020 A game of four quarters
Seven trusts, two quarters. Are our team still happy with their trust picks for 2020?
27 Feb 2020 Fund Analysis
After an extraordinary 2019, JMI has seen its discount once more slip, offering a potentially attractive entry point…
02 Jan 2020 Crystal Balls
Drunk on our success in choosing funds to perform well in 2019, the team at Kepler Trust Intelligence is back at the table with a glint in its eye…
07 Aug 2019 Fund Analysis
The managers of JPMorgan Smaller Companies apply a clear, consistent process to UK smaller companies to produce consistent returns...
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