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JPMorgan Emerging Markets Investment Trust: September 2020 update

Senior Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost and performance of JPMorgan Emerging Markets Investment 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.

  • Austin Forey has built years of experience of investing in emerging markets
  • He also benefits from the research carried out by a large team of portfolio managers and analysts based across the globe
  • Forey and his team focus on quality companies with sustainable growth prospects

How it fits in a portfolio

This investment trust provides broad exposure to the higher-risk emerging markets, which makes it a more adventurous way to try to grow wealth over the long term. It could help diversify a global portfolio focused on long-term growth, and sit well next to funds or investment trusts that mainly invest in developed markets.

Manager

Austin Forey is an emerging markets stalwart and has managed this trust since 1994. He started his investment career at JPMorgan prior to this in 1988, and has also spent time researching other markets, such as the UK, so he has a broad knowledge of global investment markets.

In addition to JPMorgan Emerging Markets Investment Trust PLC , Forey runs or contributes to other emerging markets portfolios at JPMorgan, using the same core process throughout. This includes the open-ended JPMorgan Emerging Markets Fund, which he's also managed since 1994. Leon Eidelman was appointed co-manager of the open-ended fund in 2013, and the two managers have worked closely for several years.

While Forey has plenty of experience investing in emerging markets, he also draws on a well-resourced team for ideas and analysis. There are currently around 100 portfolio managers and analysts based in eight countries across the globe. We think this is invaluable given the vast range of countries and companies the team needs to consider, and it also means they've been able to expand their research coverage over time.

Process

Forey aims to perform better than the broader emerging markets by investing in high-quality companies that can sustain earnings growth over the long term. He believes most investors underestimate the potential for share price growth in companies that can grow their earnings at a sustainable pace. This allows him to buy company shares at a reasonable price, and hold on to them as they grow their profits, and hopefully their share prices, over the long run, although there are no guarantees.

Forey has the final say over what companies make it in and out of the trust. But the wider team of analysts also carry out extensive research and provide new ideas. They typically travel across the region to visit companies and gain insight into what's happening in different economies.

The team looks for quality companies with the aim of calculating how much a company will grow its earnings over the next five years. They consider the financial strength of a business, the quality of the management team and the decisions it takes, and the level of corporate governance. Other factors, such as the dividends a company pays and how changes in a country's currency might impact a business, are also considered.

The manager mainly invests in large, established firms, but also invests in some medium-sized companies with greater growth prospects. He currently mainly focuses on three core areas: the technology, financials and consumer sectors.

In particular, Forey believes the coronavirus pandemic has spurred growth in e-commerce and online spending across the globe, and doesn't see this abating. As a result he invests in a number of companies that could benefit from this trend. Within financials, the manager invests in some banks, but also insurance businesses and other diversified financials, such as stock exchanges. Some of the trust's largest investments currently include Chinese tech giants Alibaba and Tencent, insurance firms AIA Group and Ping An Insurance, and online marketplace Mercadolibre.

On the other hand, Forey currently avoids sectors such as energy, healthcare and utilities, where he finds fewer opportunities for long-term growth. He also doesn't like the fact many of these are capital intensive industries, which means they require large amounts of investment to produce their goods or services. They also tend to have more fixed assets, such as factories or equipment, which cost more to maintain.

Please note the trust can use gearing (borrowing to invest) and derivatives, which if used adds risk. It can also invest in smaller companies, and has a fairly small number of holdings, which also increases risk.

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 portfolio are able to tap into this experience and local knowledge. The group is home to a strong emerging markets offering and the team is stable, with little change among senior members.

Forey has remained loyal to the group over the years and we think he is dedicated to the emerging markets team, research and group of funds. We view it positively that he, along with other fund managers, are incentivised to focus on long-term performance.

The manager also takes into account sustainability issues. He favours companies with strong governance, which could enhance a firm's reputation, and actively engages with businesses to help reinforce positive behaviour.

Cost

The trust's ongoing annual charge is 1.02%. 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 outperformed the broader emerging stock market since Forey took over in 1994. This is no mean feat as many emerging markets portfolios have struggled to grow more than this benchmark over such a prolonged period. There have been periods when the trust has underperformed though, and this will happen at times in the future too.

So far this year, the trust has been subject to the volatility created by the coronavirus crisis, similar to most that invest in global stock markets. The trust’s share price fell sharply in mid-March, and this was exacerbated as the trust's discount to the net asset value (NAV) widened due to investor uncertainty. At one point the discount widened to around 16%, though performance has since recovered to some extent and the discount stands at 8.6% at the time of writing. This serves as a reminder of how volatile these markets can be, and past performance isn't a guide to future returns.

Over the course of the six months to 30 June, Argentina's Mercadolibre has been the strongest performer in the trust, boosted by an increase in online sales. In terms of countries, China has held up well this year – it was the first into the coronavirus crisis, but this means it was also the first to experience a good recovery so far. India, to which the trust has a bias, hasn't held up as well, but Forey remains confident in the country's longer-term prospects.

Annual percentage growth
Jul 15 -
Jul 16
Jul 16 -
Jul 17
Jul 17 -
Jul 18
Jul 18 -
Jul 19
Jul 19 -
Jul 20
JPMorgan Emerging Markets Investment Trust PLC 20.2% 20.9% 9.1% 23.2% -0.5%
FTSE Emerging 16.8% 22.4% 5.7% 7.7% -1.1%

Past performance is not a guide to the future Source: Lipper IM to 31/07/2020.


Find out more JPMorgan Emerging Markets Investment Trust, including charges

JPMorgan Emerging Markets Investment Trust key information document

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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