Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan MidCap. 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 MidCap Investment Trust (JMF) aims to generate long-term capital growth from investment in a portfolio of UK mid-cap stocks. Managed by Georgina Brittain and Katen Patel, the trust looks to identify structural winners in the mid-cap market and utilises a stylistically blended approach which combines qualitative and quantitative elements.

As we discuss under Portfolio, the managers are currently seeing significant opportunities and attractions within the UK mid-cap space where high quality companies with good operational momentum are, in their view, trading at attractive valuations. They believe the mid-cap market generally tends to offer long-term opportunities for stockpickers given lower levels of broker coverage and the greater potential for shares being mispriced relative to the opportunities for companies.

Despite strong returns and despite (or perhaps reflecting) the significant opportunity the managers currently see in the UK market, the discount on JMF remains wide at c. 11.5% (as at 01/03/2021). As we discuss under Performance and Discount, this is wide relative to the wider market and the trust’s own history. Under Performance, we have looked at historic instances where JMF has traded at similar discount levels and subsequent returns, and these have on average seen strong subsequent outperformance by JMF.

Although JMF is primarily focussed on generating capital growth, the board has also aimed to increase the dividend in excess of inflation. Under Dividend we note that we believe the current historic yield of c. 2.6% looks well supported by substantial revenue reserves at present, and we think the board should have capacity to grow the dividend in the current financial year even assuming underlying income is impaired.

Annual results | 17 September 2021

"As the UK economic picture improved, stock selection drove strong returns for the JPMorgan Mid Cap Investment Trust (JMF).”

While not a straightforward year to navigate, JMF's chairman said the managers' balanced investment approach helped deliver a strong performance. The Company outperformed its Index by 11.9% for the year to 30 June, 2021, returning 48.6% vs the benchmark1 return of +36.7%.

1 - FTSE 250 Index excluding Investment Trusts

Analyst's View

The long-term track record of Georgina and Katen is very strong, and we don’t think the short-term underperformance over the past 12 months should be of concern to existing shareholders. Consistency of process and deep analytical resources in a part of the market with limited analyst coverage offers advantages in stock picking, whilst the balanced factor input process should ordinarily limit the relative headwinds the trust could face from any particular set of macroeconomic or market conditions.

We regard the presently wide level of discount as an attractive entry point for the trust; our analysis suggests discount levels of similar or greater width have typically seen strong subsequent outperformance. Given the tendency of JMF to capture market upside effectively and its explicitly mid-cap focus, any UK market outperformance should give a further boost to NAV returns in our opinion, and we are optimistic on the outlook for a UK market which is, as the managers point out, displaying robust positive earnings revisions and yet trades on a significant valuation discount to international peers.

The current, relatively full, deployment of gearing should further support any upside capture, whilst the robust levels of revenue reserve cover available to the board means we suspect that investors can be paid a reasonable dividend (c. 2.6%) to wait in the short term.

bull bear
Strong long-term track record
Gearing can exacerbate downside, as well as amplify upside
Current discount level looks highly attractive
Sharp value rally has proven a slight headwind to relative returns which seems likely to persist
Experienced team with significant analytical resources available to them
Charges are slightly above average for sector
Continue to Portfolio

Fund History

30 Aug 2023 UK OK, HUN?
Sentiment towards the UK is at rock bottom, which means only one thing…
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..?
30 Mar 2023 What I’m doing with my allowance this tax year
Two of our analysts debate whether to invest in punchier funds for the long term or take a more cautious view…
28 Feb 2023 Fund Analysis
JMF could be poised to capture a market bounceback…
22 Sep 2022 Fund Analysis
JMF has a powerful combination of performance drivers…
24 Nov 2021 Fund Analysis
Despite strong recent performance and excellent long-term track record, JMF is trading at a wide discount…
11 Aug 2021 In at the deep end
Does seeking out wider-than-usual discounts help investors systematically outperform in the UK trust space?
02 Jun 2021 Fortune favours the brave (sometimes)
Our research suggests wide discounts often herald high NAV returns too…
28 Apr 2021 The next value opportunity?
Two of our analysts debate whether Europe's improving vaccination programme will be the next opportunity for investors in their pursuit of returns...
25 Mar 2021 Fund Analysis
Despite a strong long-term track record, JMF is currently on a wide discount…
10 Sep 2020 Fund Analysis
JMF uses quant research and fundamental analysis to take advantage of investor psychology and market inefficiencies...
28 May 2020 Kepler Rated: JPMorgan Mid Cap
JMF uses quant research and fundamental analysis to take advantage of investor psychology and market inefficiencies...
18 Mar 2020 Fund Analysis
JMF uses quant research and fundamental analysis to take advantage of investor psychology and market inefficiencies...
17 Jul 2019 Ready for action
In the second part of our active management series, we assess the most active managers across the major closed-ended equity sectors…
10 Jul 2019 Fund Analysis
JMF uses quant research and fundamental analysis to take advantage of investor psychology and market inefficiencies ...
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