JPMorgan Asia Growth & Income 10 August 2023
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by JPMorgan Asia Growth & Income. 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.
Managers Ayaz Ebrahim and Robert Lloyd aim to provide investors in JPMorgan Asia Growth & Income (LON:JAGI) core exposure to Asia through a portfolio of quality companies with a structure that offers both capital growth and a reliable Dividend. They utilise the full extent of JPMorgan’s extensive regional resources, which includes over 100 professionals based in a number of on-the-ground offices across the continent. This team have an extensive history of investing in the region and have built an enviable research capability. Ayaz and Robert will utilise this in their process, which combines top-down analysis and bottom-up fundamental research with the aim of building a portfolio of quality companies, tapping into the long-term growth themes in the region, but with an eye on potential risks (see Portfolio).
This approach has driven outperformance of the benchmark over both the long term and short term. Asia had a difficult year in 2022, partly as a result of the fallout from China’s zero-covid policy, but in the subsequent bounce into 2023, the managers have delivered strong outperformance of the benchmark. They believe their approach of offering core, risk-aware exposure will continue to help deliver outperformance over the long term too (see Performance).
JAGI’s shares are trading at a Discount to NAV that is one standard deviation wider than the five-year average. The shares have traded at a premium for sustained periods in the past five years, most recently in early 2022, but have slipped to a wide discount as investor sentiment towards the region has soured. The board has been active in the past year with buybacks in attempting to narrow this discount.
We believe JAGI offers investors exposure to the exciting growth opportunities in Asia with the reassurance of a core approach, including a reliable dividend that is embedded into the process. It can be seen as a lower risk way into an asset class that has a number of long-term growth themes versus some of its peers. As such, we believe JAGI can be considered as a vehicle to offer sleep-at-night exposure to the attractions of Asia.
JAGI’s Discount is arguably an opportunity for long-term investors at the current level. The shares have traded at a premium for notable periods in the past five years, which we believe is evidence of its attraction amongst the peer group. However, they are currently trading almost one standard deviation wider than their five-year average and within the range the board has indicated it will buy back shares. We argue this could be viewed as a floor for the discount, which may prove an opportunistic entry point.
The trust’s Dividend can also be seen as a further attraction. We believe the approach of paying this from NAV allows the managers to focus on identifying the best total return opportunities for the trust but still provides investors with the reassurance of a dependable income stream. Whilst the actual amount may vary, it further adds to the appeal of an all-round core exposure to the region.
- Trust is trading at a wide discount
- Dividend approach offers reliable income and capital growth opportunities
- Experienced management team backed up by extensive resources
- Core exposure means trust could underperform more aggressively positioned peers in rising markets
- Active management can lead to periods of underperformance as well as outperformance
- Dividend amount can vary and will fall in line with the trust’s NAV