TIDMJAM
RNS Number : 3646T
JPMorgan American IT PLC
20 March 2019
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN AMERICAN INVESTMENT TRUST PLC
PROPOSED CHANGE IN INVESTMENT STRATEGY
20th March 2019
Legal Entity Identifier: 549300QNAI4XRPEB4G65
The Board of JPMorgan American Investment Trust plc ('the
Company') announces its intention to change the large-cap component
of the Company by moving to a higher-conviction investment
approach.
The Board of the Company has undertaken a review of the options
available from the range of strategies offered by JPMorgan Asset
Management ('the Manager') for the large cap portfolio, which
represents the vast majority of the Company's asset base. This
wide-ranging review has aimed to identify an investment strategy
that offers the prospect of attractive returns for the Company,
while maintaining its "core" US exposure, which the Board believes
to be important to existing shareholders.
The Company invests in a portfolio of large capitalisation
companies, representing c.90-100% of the equity portfolio,
alongside a portfolio of smaller companies, which can comprise up
to 10% of the equity portfolio. Both portfolios invest in North
American equities.
It is proposed that the large cap component of the Company will
in the future adopt a higher- conviction approach combining the
best ideas from the Manager's growth and value investment teams.
This new strategy will require certain amendments to the Company's
investment policy which the Board considers material and is subject
to approval by shareholders before the new strategy can be
implemented. The Board intends to propose a resolution for the
approval of the new investment policy at the forthcoming Annual
General Meeting ('AGM').
The new strategy, described by the Manager as "Equity Focus"
with over $2.3 billion under management, uses an unconstrained
bottom-up approach to build a portfolio of high quality companies
across the value and growth spectrum. For value companies, the
Manager seeks businesses with durable franchises,
shareholder-friendly management and strong free cash flows. From
among growth companies, the portfolio will include companies with a
large addressable market, a sustainable competitive advantage and a
proven record of delivering their business plans.
This investment approach would see the large cap element of the
Company's asset base invested in a portfolio that typically
comprises some 30-40 stocks. The growth and value components of the
portfolio would be approximately equal, with a maximum tilt in
either direction of 60:40.
Management Team
The co-lead managers of the new proposed large-cap strategy will
be Jonathan Simon and Tim Parton.
Jonathan is a Managing Director in the Manager's US Equity Group
with some 38 years' experience with the Manager and currently
manages a number of US funds that follows a value mandate as well
as being co-lead manager of the Manager's Equity Focus strategy. He
has been an employee of the Manager since 1980 and holds an MA in
mathematics from Oxford University.
Tim Parton is also a Managing Director in the US Equity Group,
has been with the Manager for 32 years and manages a number of
growth strategies including the Growth Advantage Fund and since
28th February 2017 has, alongside Jonathan, been the co-manager of
the Manager's Equity Focus strategy. Tim holds a BSc in economics
and accounting from the University of Bristol and is a member of
the New York Society of Security Analysts and a CFA
charterholder.
The portfolio managers are supported by a local team of over 35
research analysts with specific sector research responsibilities
who are responsible for the idea generation and the ongoing
monitoring of companies within their sphere of expertise.
If approved by shareholders, this change will mark the end of
Garrett Fish's involvement in managing the Company's portfolio. He
is moving on to other responsibilities with the Manager that have
necessitated his departure. Garrett has been the lead investment
manager of the Company's assets for over 15 years at the Board
would like to thank him for his dedication to the Company and its
shareholders.
Proposed New Investment Strategy
The proposed new investment strategy will reflect the best ideas
from the Manager's value and growth investment strategies sourced
from following processes.
Value Ideas
Value stocks within the portfolio are selected from an initial
universe of companies with a market capitalisation in excess of $1
billion and a P/E ratio of below 20, which currently includes
approximately 700 stocks.
After identifying companies that exhibit these basic investment
credentials, the process moves to in-house research analysing the
market in which a company operates, its franchise and competitive
positioning, financial and operational results, and importantly,
the quality of its management and its behaviour towards
shareholders. Potential investments are assessed over a two or
three-year time horizon with attention focusing on those companies
which the Manager expects to be substantially re-rated over that
timeframe.
Overlying this process is a rigorous analysis of valuation that
frames the price the Manager is willing to pay for an investment,
quantifies the potential upside and the price at which the Manager
would be prepared to sell.
Growth Ideas
Growth stocks are sourced from a universe of over 800 securities
which are screened for a number of factors including earnings
revisions, stock price momentum and valuation measures including
P/E ratio and Price/Free Cash Flow. Systematic screening results in
a universe of some 150 stocks which are subjected to detailed
analysis and face-to-face meetings with management by the portfolio
managers and sector analysts teams.
This analysis is designed to identify companies deemed capable
of achieving growth that exceeds market expectations and incudes a
detailed review of characteristics including an assessment of the
industry's competitive dynamics, the attractiveness and resilience
of the company's business model, the strength and track record of
management and the company's financial strength.
Portfolio Construction
Responsibility for portfolio construction and risk management
rests with the portfolio managers who construct a concentrated core
portfolio from the highest ranking growth and value stocks. Each
portfolio manager selects securities based on their disciplined
process and investment style with position sizes based on the
strength of conviction and the allocation between the growth and
value stocks is managed within a maximum range of 60:40.
The value and growth portions may include securities from all
sectors, but will tend to own the majority of positions with
sectors traditionally tied to their respective investment styles,
for example financial services for value and technology for growth.
The portfolio managers will also ensure that the portfolio is
managed within the investment guidelines and with an eye to broader
measures of investment risk including active monies, style tilts
and tracking error.
Portfolio Comparison and Results
The table below sets out the annualised performance of the
investment strategy in sterling and before fees as at 31st December
2018.
Annualised Return Proposed Strategy The Company's S&P 500 Index
(% p.a.) Current Large
Cap Portfolio
One year 2.35 0.20 1.56
Three years 15.18 13.31 14.71
Five years 14.40 13.50 14.35
Since Inception 16.34 15.02 15.57
Source: JPMorgan Asset Management, Wilshire. Strategy
performance is calculated in accordance with GIPS standards where
segregated mandate portfolios and/or pooled funds managed in
accordance with the strategy are grouped into a "composite".
Inception date is 31st July 2011.
As at 28th February 2019, being two years since Jonathan Simon
and Tim Parton began co-managing the investment strategy, their
performance record, again in sterling and before fees, is as
follows:
Annualised Return Proposed Strategy The Company's S&P 500 Index
(% p.a.) Current Large
Cap Portfolio
Two years 8.58 6.26 7.09
Source: JPMorgan Asset Management, Wilshire. Strategy
performance is calculated in accordance with GIPS standards where
segregated mandate portfolios and/or pooled funds managed in
accordance with the strategy are grouped into a "composite".
The calendar year performance of the proposed new strategy on a
calendar year basis, in sterling and before fees, compared with the
S&P 500 Index is as follows:
Proposed Strategy S&P 500 Index Excess Return
(% pa) (%pa) (%pa)
2012 13.81 10.91 +2.90
2013 38.35 29.93 +8.42
2014 15.38 20.76 -5.38
2015 11.13 7.25 +3.88
2016 30.30 33.55 -3.25
2017 14.57 11.29 +3.28
2018 2.35 1.56 +0.79
Source: JPMorgan Asset Management, Wilshire. Strategy
performance is calculated in accordance with GIPS standards where
segregated mandate portfolios and/or pooled funds managed in
accordance with the strategy are grouped into a "composite".
The table below sets out some key quantitative attributes of the
proposed investment process as at 31st December 2018.
Proposed Large The Company's
Cap Strategy Current Large
Cap Portfolio
Typical Holdings Range 30-40 60-100
Maximum single stock exposure 8% 8%
Expected Tracking Error Range 3-6% 2-5%
Active Share 79% 68%
3 year realised tracking error 4.32% 3.09%
Number of holdings 40 60
Largest Absolute Sector Weight Financials (17.4%) Information technology
(20.8%)
Largest Absolute Stock Position Microsoft (5.4%) Apple (5.7%)
Source: JPMorgan Asset Management
The Company's current flexibility to invest a component of its
asset base in a portfolio of small cap equities managed by Eytan
Shapiro will be unchanged, as will the ability to use gearing to
enhance returns in accordance with the current investment
policy.
Management Fee Changes
Alongside the proposed changes in investment process, the Board
has negotiated an amendment to the current fees paid to the
Manager. The introduction of MIFID II in 2018, which requires
wealth managers and other investment platform providers to disclose
"look through" costs to their underlying investors has reinforced
the need to offer simple and value-for-money fees. The Company is
keen to retain its competitive cost position against rival
investment funds, including passive and actively managed open and
closed-ended funds.
In order to simplify the Company's fee offering, the Company is
removing the performance fee element of the fee, backdated to 1st
January 2019. These fees are often seen as an unnecessary
complication by potential investors and the Board believes that
this move is in line with shifts seen across the investment trust
sector in recent years, where performance fee arrangements which
were once commonplace are now much less so.
The Board is also pleased to announce that the Manager has
agreed to waive its management fee for a period of nine months
commencing on 1st June 2019, which represents an amount
approximately commensurate to the underperformance arising from the
historic performance fee arrangements. Thereafter the management
fee will resume, charged at the current rate of 0.35% per annum on
the first GBP500 million of net assets; 0.30% per annum on net
assets above GBP500 million and up to GBP1 billion; and 0.25% per
annum on any net assets above GBP1 billion. The Manager will also
bear the transaction costs associated with the reorganisation of
the portfolio to the proposed new investment strategy.
The Board believes this package of fee simplification and a
short-term fee waiver should be welcomed by shareholders. The
Company will continue to keep management fees actively under review
in an effort to maintain its current competitive ongoing charges
ratio.
Shareholder Resolution
In order to affect this proposed change in the large cap
investment strategy, the Company's forthcoming AGM, to be held on
2nd May 2019, will include an ordinary resolution giving
shareholders the opportunity to vote on a revised investment policy
to accommodate the attributes of the new strategy. The resolution
and the full text of the proposed new investment policy, will be
included in the Notice of the Annual General Meeting included in
the financial statements for the year ended 31st December 2018
which will be published on or around 22nd March 2019. The financial
statements will also include the full text of the proposed new
investment policy.
Enquiries:
Simon Crinage
Richard Plaskett
JPMorgan Funds Limited - 020 7742 3445/3422
Joe Winkley
Winterflood Investment Trusts - 020 3100 0000
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement via Regulatory Information Service
this inside information is now considered to be in the public
domain. The person responsible for arranging for the release of
this announcement on behalf of the Company is Alison Vincent of
JPMorgan Funds Limited.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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