JPMorgan American 01 September 2020
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by JPMorgan American. 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.
Aims to achieve capital growth from North American investments by outperformance of the S&P 500 index. The Company will predominantly invest in quoted companies including, when appropriate, exposure to smaller capitalisation companies, and emphasise capital growth rather than income. The Company has the ability to use borrowing to gear the portfolio within the range of 5% net cash to 20% geared in normal market conditions.
Source: Source: JPMorgan, Morningstar
JPMorgan Asset Management Inc
Jonathan K.L. Simon; Eytan M. Shapiro; Timothy RV Parton;
Association of Investment Companies (AIC) Sector
12 Mo Yield
Dividend Distribution Frequency
Latest Market Capitalisation
Latest Net Gearing (Cum Fair)
Latest Ongoing Charge Ex Perf Fee
(Discount)/ Premium (Cum Fair)
Daily Closing Price
With net assets worth north of £1bn at the time of writing, JPMorgan American Investment Trust (JAM) has long been the bellwether investment trust for exposure to North America, offering a core exposure to mainly large-cap stocks. JAM continues to offer this, but since 1 June 2019 has been using a new approach, with the portfolio being managed by two experienced individuals with very different styles – one growth (Timothy Parton) and one value (Jonathan Simon).
Each manager contributes a highly concentrated portfolio of best ideas – at any one time between ten (minimum) and 20 (maximum) holdings. Each has a strong awareness of the other in a portfolio context, and the split between growth and value is expected to remain fairly evenly balanced over time.
The year to date has clearly been a volatile one, with each manager facing different challenges. In the value portfolio, Jonathan has been using volatility to trade up in terms of quality. In the growth portfolio, Timothy has been trimming stocks in which the market has excessive optimism, but is finding lots of new ideas. As such, the growth portion of the portfolio is being allowed to run up to 54% (as at 30/06/2020), rather than being rebalanced.
The unique feature of the strategy – combining concentrated growth and value portfolios – has meant that JAM has been more consistent and less volatile than peers over the past year. The trust underperformed during the market sell-off, but has rebounded more strongly so that it is outperforming peers and is only very marginally behind the S&P 500 since the team took over.
In our view, the investment approach adopted in June last year is highly distinctive. The concentrated strategy seems especially well suited to JAM as a closed-ended fund, where the structural advantages afford more latitude to run concentrated portfolios.
The managers have a strong long term track record and, should they be able to perform well in future, the discount might be expected to narrow on a sustained basis. In the meantime, JAM’s board has a commitment to “buy shares back when they stand at anything more than a small discount to NAV”. The board bought shares back consistently through the recent stock-market sell-off, even during the darkest weeks of March. We think that this commitment should be reassuring to investors.
JAM’s current OCF is extremely low at 0.18% (Source: JPMorgan, as at 30/06/2020), but this is expected to normalise this year at 0.33%. This makes it relatively low cost in comparison with actively managed funds, and also against passive funds.
|Interesting strategy, which has a strong historical track record
||The managers are relatively unknown in the investment-trust sphere, and a track record will take time to develop
|Large, liquid trust representing the only ‘core’ US strategy in the investment-trust sphere, with the benefit of a highly differentiated approach
||Gearing can exacerbate downside
|Very low OCF