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JPMorgan Elect Managed Growth: November 2020 update

In this investment trust update, Investment Analyst Dominic Rowles shares our analysis of the manager, process, culture, cost and performance of the JPMorgan Elect Managed Growth Trust.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • This trust is managed by three investors, including Katy Thorneycroft who has two decades of investment experience
  • The trio have access to a large, well-resourced investment team
  • They've delivered strong performance over the long term

How it fits in a portfolio

JPMorgan Elect plc is an investment trust with a choice of options to suit investors’ needs: income, growth, capital preservation, or a combination of all three. Investors can switch how much they invest between the three options on a quarterly basis, without paying UK capital gains tax, although tax rules can change and benefits depend on personal circumstances.

The JPMorgan Elect Managed Growth portfolio aims for long-term capital growth by investing in other investment trusts and open-ended funds that invest across the globe. The JPMorgan Elect Managed Income portfolio aims to provide a growing income with the potential for some capital growth from a portfolio of UK shares. The JPMorgan Elect Managed Cash portfolio aims to shelter investors’ wealth and offers a yield based on short-term interest rates.

In this review, we look at the JPMorgan Elect Managed Growth portfolio. We think the trust could be used as a building block for a more adventurous portfolio. It could also bring international diversification to a UK-focused portfolio. Investors in investment trusts should be aware they can trade at a discount or premium to the net asset value (NAV).

Manager

Katy Thorneycroft is the trust's lead manager. She's been at JPMorgan throughout her two decade-long career in the investment industry. She manages this trust alongside a small number of other multi-asset and multi-manager funds and trusts. There's an element of crossover among the various portfolios she runs, so we think this is a manageable workload.

Thorneycroft is supported by co-managers Simin Li and Peter Malone, as well as JPMorgan's multi-asset team. The team includes around 80 people globally, including portfolio managers, strategists, and quantitative analysts. The team can also draw upon the 1,200 investment professionals across the broader firm.

Process

The trust invests across a range of investment trusts and open-ended funds, which are carefully blended together. Many are managed by other JPMorgan managers, but Thorneycroft and her team also have the flexibility to invest outside the JPMorgan range of funds.

Before the team considers investing in a fund, they carry out a quantitative review of historical performance, and the manager's investment process. They combine this with a qualitative analysis of the fund, which involves regular meetings with the underlying managers. Overall, they want to satisfy themselves that the managers they're investing with have the potential to consistently outperform their benchmarks over the long term.

The team also considers the outlook for the regions each manager invests in, increasing or reducing their investment as their views evolve. Their asset allocation decisions are informed by regular meetings with the Multi-Asset Solutions Team, which is responsible for setting the global asset allocation views for JPMorgan Asset Management as a whole.

The managers also try to take advantage of price fluctuations, increasing investments in trusts on wider discounts and taking profits as the discounts tighten.

The trust typically invests around 50% in UK businesses, with the rest spread across companies based in the US, Europe, Asia and higher-risk emerging markets. The trust's asset allocation can be seen on the chart below.

Chart showing JP Morgan Elect Managed Growth's geographical exposure

Source: JPMorgan to 30/09/2020

The trust's largest investments currently include Finsbury Growth & Income. The trust is managed by Nick Train, a veteran investor with over three decades of experience under his belt. Train seeks out a small number of high-quality UK companies that he believes can deliver good long-term total returns – growth in both capital and income. Most of his portfolio is made up of large, well-established businesses, and nearly half is currently invested in the consumer goods sector. Snack maker Mondelez, everyday household goods company Unilever, and alcoholic drinks company Diageo are examples.

Please note the managers of this trust have the flexibility to borrow money to invest (gearing), which magnifies losses when stock markets fall. The underlying managers can invest in emerging markets, smaller companies and derivatives, which increases risk further. Potential investors should refer to the latest annual reports and accounts for details of the risks and charging structure.

Culture

JPMorgan is one of the world's biggest asset managers. It has investment professionals based all over the world, and the team behind this trust can tap into this experience and local knowledge.

JPMorgan believes companies should act in a socially responsible way. They recognise that non-financial issues such as social and environmental factors have the potential to impact the share price, as well as the reputation of the companies they invest in. The managers therefore analyse how each underlying manager thinks about environmental, social and governance (ESG) risk within their investment processes, how they mitigate those risks, and what rationale they have for investing in companies that carry more ESG risk.

Cost

The trust's annual ongoing charge is 0.58%. Investors should refer to the latest annual reports and accounts and Key Investor Information for details of the risks and charging structure.

If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. Our platform fee doesn’t apply if held in a Fund and Share account.

Performance

The trust has a good long-term track record. Over the past 10 years, it's turned an investment of £10,000 into £23,815*. The trust's benchmark would've returned £21,635 over the same period, although past performance isn't a guide to the future.

The trust also outperformed its benchmark over the past year, although it still lost money. The share price fell 3.1%, beating the benchmark (50% FTSE All-Share and 50% FTSE World ex UK) by 3.3%. At the time of writing, the trust trades on a 4.4% discount to NAV.

The best-performing trust in the portfolio was Baillie Gifford US Growth. Its focus on the US stock market proved a major tailwind as the US outperformed most other global stock markets over the period. A number of the trust's investments have benefited from the coronavirus pandemic, including online retailer Amazon and video communications business Zoom. Electric car business Tesla, one of the trust's largest investments, performed well too after reporting progress in both production and deliveries. The trust's premium also widened over the year.

The weakest performer was Fidelity Special Values. The trust is focused on the UK, which underperformed broader global stock markets. Manager Alex Wright's contrarian investment style also held back returns. He invests in companies that often go ignored by other investors. Maybe they've missed a profit target, or the management team made some unpopular decisions. Either way, they must be capable of a recovery. This investment approach has been out-of-favour, and the trust underperformed the broader UK stock market over the past year.

Annual percentage growth
Oct 15 -
Oct 16
Oct 16 -
Oct 17
Oct 17 -
Oct 18
Oct 18 -
Oct 19
Oct 19 -
Oct 20
JPMorgan Elect Managed Growth 12.9% 18.6% 0.8% 9.8% -3.1%
FTSE All-Share/All World ex UK (50:50) 21.3% 13.7% 1.8% 9.5% -6.4%

Past performance is not a guide to the future. Source: *Lipper IM to 31/10/2020.

FIND OUT MORE ABOUT JPMORGAN ELECT PLC MANAGED GROWTH INCLUDING CHARGES

JPMORGAN ELECT PLC MANAGED GROWTH KEY INVESTOR INFORMATION

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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