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Fund Profile

JPMorgan UK Smaller Companies 27 February 2020


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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JPMorgan Smaller Companies Investment Trust (JMI) offers investors exposure to some of the fastest-growing, most innovative smaller companies in the UK. The managers look for companies whose performance is driven by structural factors, rather than relying on the performance of the overall UK economy.

Georgina Brittain and Katen Patel are at the helm of the trust, utilising a bottom-up stock-picking approach designed to take advantage of what they see as the inefficiencies inherent in the small-cap market. In particular, the managers are looking for companies that exhibit quality, momentum and value characteristics, creating a diverse portfolio of 85 holdings.

Returns over the long term have been impressive for the trust, which has outperformed the benchmark Numis SC Plus AIM ex IT in eight of the past ten calendar years on an NAV TR basis. However, the most startling period of performance has been over the past calendar year. Over 2019, JMI delivered an NAV total return of 49.8%, benefitting from some of the uncertainty surrounding the UK’s political situation subsiding.

This dramatically improved sentiment towards the trust and saw the discount narrow from double digits to around NAV, meaning a share price return of c. 70% (the strongest performer in the entire equity investment trust universe). However, the discount has since slipped out again and the shares currently trade at a discount of 4.9%.

Analyst's View

In our view, JMI has long been one of the standout trusts within the UK smaller companies sector. The managers mitigate the risks typically associated with smaller companies through constructing a well-diversified portfolio of stocks that have long-term structural drivers. This is supported through the distinctive investment process, which focuses on stock characteristics (principally value, quality and momentum).

Last year saw a dramatic turnaround in sentiment towards JMI. Having consistently traded at a double-digit discount, the landslide victory from the Conservatives saw a number of companies in the portfolio re-rate and the discount narrow rapidly. Aided by relatively high levels of gearing, the trust ended 2019 as the best performer in price terms across the entire investment trust universe.

Despite the strong year, the discount has started to slip back again, and currently stands at c. 7%. This compares to the weighted average discount of 3.9% in the AIC UK Smaller Companies sector, and offers a potentially attractive entry point into the trust.

Discount has widened once more, despite exceptional performance
High levels of gearing can see the trust amplify volatility, as we saw in Q4 of 2018
Strong track record over the long term relative to the benchmark and peers
Dividends are variable so the trust is unlikely to appeal to income-seekers
Highly experienced fund manager with two decades’ experience on the trust

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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