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JPMorgan Global Equity Income Fund research update

Heather Ferguson | Mon 02 March 2015

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

Equity income funds have traditionally focused on the UK stock market due to the established dividend culture in many British companies. However, as investors look to diversify their income portfolios, global equity income funds are becoming more popular.

The JPMorgan Global Equity Income Fund managed by Gerd Woort-Menker, has had mixed performance since its launch in 2007. The fund's relatively defensive positioning provided an element of shelter throughout the 2008 financial crisis, however it has failed to keep up with its peers through the subsequent recovery. Over the past 3 years, the fund's un-hedged share class (see explanation below) has broadly kept pace with its peers but underperformed the MSCI AC World index. More recently performance has shown signs of improvement, although there are no guarantees this will continue.

Annual percentage growth
Feb 10 -
Feb 11
Feb 11 -
Feb 12
Feb 12 -
Feb 13
Feb 13 -
Feb 14
Feb 14 -
Feb 15
JPMorgan Global Equity Income Fund A N/A N/A 13.34% 7.61% 14.09%
JPMorgan Global Equity Income Fund (Hdg) 14.95% -5.31% 14.52% 12.85% 11.49%
MSCI AC World TR GBP 19.31% -1.45% 15.66% 6.66% 19.6%
IA Global Equity Income 17.36% 1.23% 15.53% 7.71% 12.47%

Past performance is not a guide to future returns. Full year performance data for the hedged share class are unavailable before 01/02/2012. Source: Lipper IM

The manager is currently biased towards companies he feels will benefit from the improving economic environment across developed countries; he favours companies in the financial, technology, insurance, and consumer services sectors, and seeks businesses capable of growing their dividend over time. He believes these companies are more attractively valued than defensive, high-yielding firms, and feels they could perform well when interest rates rise. This has hurt more recent performance as these economically-sensitive companies have underperformed their more defensive counterparts. However, the manager has maintained this positioning as he is confident his views will come to fruition in time. The fund also features investment in smaller companies, which can be more volatile than their larger counterparts.

Quantitative easing in Europe could help to revitalise growth and reduce the threat of deflation. While a break-up of the EU trigged by a Greek exit could de-rail a recovery, the manager feels prospects for many European companies are supported by improving profits and dividend growth. He also feels the region is undervalued by other investors, which provides an opportunity to purchase shares at discounted prices.

Elsewhere, the strengthening dollar, along with continued weakness in commodity markets, has led the manager to conclude prospects for higher risk emerging market equities are poor. As their currencies weaken, the cost of their US dollar denominated debt, which has been increasing due to the low interest rates available, rises. This leaves companies with less money with which to pay dividends or invest in growth. As such, the fund currently has a lower exposure to this region compared with the MSCI AC World index.

To hedge or not to hedge?

For the past three years, the fund has offered a share class which 'hedges' (in effect aims to cancel out) the impact of any currency movements for UK investors. Which class investors use is down to personal preference. Those investing overseas with the intention of diversifying their investment and currency exposure, or investors who feel the pound is likely to weaken verses other major currencies, are likely to consider the un-hedged share class. Those who wish to reduce any influence of currency movements, or feel the pound will be stronger than other currencies, may prefer to invest in the hedged share class.

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Our view on this fund

The fund was removed from the Wealth 150 in January 2014 as it was not delivering the level of outperformance we expected. Our analysis suggests the fund's sector and geographical positioning has been positive, however stock selection has detracted from returns. While we have no major concerns over the manager's investment approach, we are not currently considering the fund for the Wealth 150 list of our favourite funds across the major sectors.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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