Fund Profile

JPMorgan Global Core Real Assets 14 October 2020

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan Global Core Real Assets . 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.

Overview
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Overview

JPMorgan Global Core Real Assets (JARA) aims to generate a 4-6% dividend yield and a 7-9% NAV total return from investing in global property, infrastructure and transportation assets, supplemented with a liquid real asset allocation. Following its launch in September 2019, JARA recently announced that it has invested all its IPO proceeds on time despite the market disruption caused by COVID-19.

The portfolio is expected to generate a yield in the middle of the expected range and in line with expectations at launch. This yield will be generated from core real assets selected to provide high-quality, forecastable and resilient cashflows providing stable, often inflation-sensitive, income and global diversification from the UK focus of most other infrastructure or property trusts.

As discussed in the Portfolio section, JARA launched a few months before the pandemic hit, which has caused uncertainty in the underlying asset classes. Although this situation has delayed some investments, it has overall offered the managers to opportunity to acquire assets at more advantageous prices and/or yields.

Demand for shares has been strong since IPO, and £57m has been raised on top of the initial £149m. This money is expected to be fully invested in Q4. The intention remains to grow the trust to £500m and beyond, offering investors cost and liquidity advantages; with the shares trading on a 16.5% premium to NAV, there are no indications this goal will be difficult to achieve. The tiered fee schedule should reduce the fees as the trust grows, while the diversification of asset base and size of the JPM Alternatives platform means that scaling up should be relatively quick and cost-effective.

Analyst's View

In our view owning real assets has only become more attractive since the pandemic emerged. They offer generally more resilient income streams than equities, greater return potential than bonds and substantial diversification benefits. Furthermore, there is an element of inflation sensitivity to the income, which could be an attractive feature right now. One possible outcome from this crisis is governments inflating away the debt incurred to fight it, while there remains the tail risk that monetary expansion – particularly under any MMT policy – could finally go too far and ignite inflation. Even if inflation does not materialise, the income streams of JARA’s real asset base should offer a significant uplift compared to both government and investment grade bonds.

We also note JARA complements the heavy UK and Europe focus of most infrastructure and property trusts. The USA and Asia should see better demographics and productivity growth in future, and real assets should be more correlated to these fundamental growth factors than equity markets. The diverse, global portfolio is only possible thanks to the breadth and depth of the JPMorgan Global Alternatives platform: we think the opportunity to access markets usually open only to institutions is attractive, and perhaps explains the high premium. However this premium will reduce the dividend yield generated to underlying shareholders. Nevertheless the longer the investor’s time horizon, the less important an initial premium should be to experienced total returns – assuming the share price converges to NAV.

bull bear
Real assets traditionally offer very little correlation to equities or bonds
A high premium would reduce the dividend yield experienced by shareholders if sustained
JARA offers access to a huge global platform of alternatives, much of which is usually restricted to institutions
Sterling has been weak since 2016, were it to rally then JARA’s returns would be reduced
The yield is potentially attractive once fully invested, and targeted total returns are equity-like
Commercial property – 50% of the target portfolio – and transport assets could see further uncertainty while the pandemic continues
Continue to Portfolio

Fund History

29 Apr 2022 Five trusts to diversify your portfolio income
Join us next week for one live webinar with a different manager every day of the week – including the chance to ask questions - focused on different solutions for those seeking a decent income…
20 Apr 2022 Flash update: JPMorgan Global Core Real Assets
JARA is firing on all cylinders and has recorded strong returns over the past year with the share price discount narrowing as a result…
06 Apr 2022 Private markets: A closer look at the expanding private debt opportunity
We look at the attractions of the private debt market, historically the hunting ground of the institutional investor…
01 Dec 2021 How to protect your portfolio from inflation
We highlight trusts which could appeal in an environment where 'transient' inflation is here to stay...
04 Aug 2021 Fund Analysis
JARA is now fully invested and offers a 4.4% yield from a diversified portfolio…
10 Mar 2021 Spring Conference '21
Audio and presentations from 21 of the UK’s leading investment trust managers…
04 Mar 2021 Slides and Audio: JPMorgan Global Core Real Assets
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 04 March...
20 Nov 2020 Flash update: JPMorgan Global Core Real Assets
JPMorgan 'real asset' trust to issue C-Shares and declares evolution of investment policy…
14 Oct 2020 Fund Analysis
JARA has fully invested initial IPO proceeds which will generate a yield of c. 5%…
05 Jun 2020 Deep impact
Audio and presentations from our conference this week, where fifteen of the world's best fund managers described a profoundly altered investment landscape...
13 May 2020 Braving the new world
Join 15 of the UK's best known fund managers at the Kepler Trust Intelligence Virtual Summit to find out how they see the world after the pandemic...
23 Apr 2020 Sucker punch
Two of our analysts debate the merits of equity income and alternative income trusts at this point in time...
23 Oct 2019 Flash update: JPMorgan Global Core Real Assets
JARA showing momentum in the aftermarket following IPO...
16 Oct 2019 Life on Mars: could inflation take us back to the '70s?
We discuss two potential catalysts for inflation - and the assets that could offer a hedge against it...
09 Oct 2019 Bond proxy?
As a replacement or complement for longer duration bonds, listed alternative income funds look an interesting, well… alternative..
31 Jul 2019 Fund Analysis
JARA is a proposed investment company that will aim to generate an attractive income and total return by investing in diverse real assets sectors that are usually only accessible to institutional investors...
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