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Fund Profile

JPMorgan UK Smaller Companies 21 May 2021


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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On 21/09/2021 JPMorgan Smaller Companies Investment Trust plc announced its corporate name change to JPMorgan UK Smaller Companies Investment Trust plc.

Click here to read the RNS announcement

JPMorgan Smaller Companies (JMI) focusses on UK smaller companies. Managed by long-standing managers Georgina Brittain and Katen Patel, JMI consists of a portfolio of companies which the managers believe exhibit superior value, quality and operational momentum characteristics when compared to the wider stock universe.

As discussed under Portfolio, JMI is constructed with a balanced but pragmatic focus on these different stylistic elements. The primary focus of the managers is on identifying stock-specific opportunities, utilising the broader resources of JPMorgan Asset Management and a variety of quantitative and qualitative tools. With the small-cap universe typically seeing lower levels of broker coverage, the managers believe this tends to offer greater potential for growth opportunities being mispriced by the wider market. Whilst bottom-up led (and with macro views informed by this research), the managers are cognisant of top-down factors and seek to assess their portfolio against base-case scenarios on an ongoing basis.

Currently this is leading the managers to seek to ensure JMI is overweight to domestic UK revenue generation and to more cyclical areas of the universe. This is not prescriptive, but helps them to determine portfolio weightings. It also informs the deployment of gearing; as we discuss, gearing facilities have in recent months been expanded to ensure the gearing ratio can remain reflective of the positive outlook of the management team after significant NAV gains (see Performance).

As we further discuss under Performance, returns have been strong over the long and shorter term. Stock selection and sector allocations appear to have been notable contributors to outperformance in this regard.

Analyst's View

JMI boasts a strong long-term track record relative to peers and the benchmark index, and the evidence suggests that this has primarily been driven by stock selection and sector allocations (with the former tending to drive the latter). We note with interest the consistency with which JMI has displayed a positive information ratio over the previous ten years (as discussed under Performance), despite intermittently more challenging periods.

With an uncertain market backdrop likely to remain in place, the balance of stylistic approaches gives us comfort that we do not need to unduly worry about macroeconomic factors having an outsized impact on relative returns. Nonetheless, the overweight to UK domestic revenues and sizeable deployment of gearing certainly aligns JMI with a bullish outlook for the UK in the nearer term. Given we share this positive outlook on the relative merits of the UK market compared to global peers, this seems a positive to us.

Longer term, the recent decision to expand the gearing facilities available to the managers (to ensure they could maintain the gearing ratio, following sizeable NAV gains) looks a positive development, ensuring that the managers retain flexibility to gear the portfolio as they deem appropriate to the opportunities they are identifying. The experience of the team, not just on JMI but across market cycles, offers further reassurance, and their willingness to buy in the teeth of the 2020 sell-off demonstrated a degree of detachment from day-to-day market volatility.

Consistent and significant outperformance over the long term
Overweight to UK revenue generation could weigh on returns if UK economy underperforms
Stylistic balance and disciplined investment framework
Gearing can exacerbate downside (as well as amplify upside)
Experienced team with significant depth of analytical resources
Discount is notably narrower than has been the historic norm

Continue to Portfolio

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…
16 Feb 2022 How keeping disciplined pays off in the small cap market
JMI’s track record shows why keeping grounded pays off in a market full of opportunity…
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…
13 Oct 2021 Look beyond the recovery trade to find tomorrow’s large caps today
While the re-opening trade has fuelled UK smaller companies in 2021, there is more to the story for the domestic economy. Here, we discuss three companies that the team at JPMorgan UK Smaller Companies Investment Trust (JMI) believe could flourish into the future…
21 Jul 2021 UK smaller companies set for long-term success
Hopes are high for the UK’s economy and particularly UK stocks, given their relatively low valuations, as we begin to pick up the pieces after the COVID crisis, and the outlook for UK smaller companies is optimistic. However, a considered approach is key to avoid simply following the crowd…
08 Jul 2021 London Calling
UK equities represent a ‘once in a generation’ opportunity for investors according to the managers who joined us to discuss the outlook 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…
09 Jun 2021 Cool Britannia?
Join the team at Kepler Trust Intelligence and six leading UK fund managers as we examine the prospects for UK equities with COVID in retreat and Brexit uncertainty finally behind us…
21 May 2021 Fund Analysis
JMI has a strong long-term track record of outperformance...
22 Apr 2021 Tapping into the UK smaller companies revival
A year ago, the outlook seemed not far off dire for UK smaller companies...
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…
22 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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