JPMorgan US Smaller Companies 24 May 2019
Disclaimer
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by JPMorgan US 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.
JPMorgan US Smaller Companies Investment Trust (JUSC) aims to provide investors with capital growth through a portfolio of US smaller companies.
Don San Jose is the lead manager of the trust, supported by portfolio managers Dan Percella and John Brachle. Together, the team use bottom-up investment analysis to identify high quality companies that demonstrate balance sheet strength and solid cashflows. Through constantly assessing the underlying company’s ‘pathway’ for earnings into the future, and the impact of the wider market, the trust is able to maintain low levels of beta, despite boasting high levels of alpha. With this said, buying companies at fair valuations is important for the team and they are not willing to overlook the price they are paying for exposure to a high growth opportunity.
Currently the portfolio is comprised of 86 companies, and there is a clear tilt towards the larger end of their universe. The weighted average market cap of a company in the portfolio is $3.88bn, 50% greater than the average for the Russell 2000 index. The largest sector overweights come from producer durables, materials and processing and consumer staples sectors. With large exposures to these sectors, one might anticipate that the portfolio has a cyclical tilt, yet the managers demonstrate that the portfolio is far more defensive than one might anticipate.
The trust has an exceptional track record relative to both peers and the benchmark Russell 2000 Index. Over the past five years, the trust has delivered NAV returns of close to 120%, considerably more than the Russell 2000 (92.8%), the IA peer group (97.6%) and the AIC peer group (86.7%). Over this period the manager has achieved an alpha of 3.41, considerably greater than the closest rival Jupiter US Smaller Companies (0.75). As with most equity vehicles, the past year has seen some ups and downs in the volatile environment. Since the start of the year, the trust has outperformed the benchmark by 2.1%, delivering 16.4% NAV returns.
Over the past few years the trust has often traded at a premium, although over the last twelve months the trust’s discount volatility has been quite high, and whilst having an average discount of 1.5% over this period, it has ranged between +6.8% and -6.4%. Currently the trust is trading on a discount of -3.5%.
Fund History
