JPMorgan American

JAM offers a reinvigorated core US equity exposure, which should help to provide protection against any future rotation between value and growth…

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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan American. 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 American

For six months now, JPMorgan American (JAM) has had a new team behind it. In general portfolio terms, the change has not been revolutionary. However, in other ways, there have been very meaningful changes.

Since June, two highly regarded individuals (Jonathan Simon and Timothy Parton) within JPM’s US Equity team have been investing JAM’s large cap assets. What sets them and the new set-up apart, is that one is a specialist value investor, whilst the other is a specialist growth investor. Each manager has discretion when it comes to holdings, but with a strong awareness of the other in a portfolio context. The split between growth and value is expected to remain fairly evenly balanced over time, but they do have the option to strategically tilt between the styles - find out more about how the team constructs the portfolio here.

They have each been tasked with managing a highly concentrated portfolio of between ten and 20 stocks, meaning JAM’s large cap portfolio can constitute between 20 and 40 stocks at any one time. In reality, the large cap portion will typically be around 40 names. This is highly concentrated by traditional portfolio standards, and means the large cap portion of JAM has the lowest number of portfolio holdings in the North America investment trust sub-sector.

Gearing is expected to be a feature of JAM, but it is tactically employed, rather than being structural. Deploying gearing is driven by both the board and manager. In October 2018, the range agreed between the board and manager was set at 0%, plus or minus 2%. In November 2019, gearing was reintroduced in the portfolio. We examine the gearing policy in more detail here.

With the US equity market seemingly so hard for active managers to beat, Timothy and Jonathan’s specialist and concentrated approach has paid off – with the strategy having historically outperformed the benchmark as well as investment trust and open-ended peer group averages. It is clearly early days yet, with only six months having elapsed, but so far they are marginally underperforming the benchmark on a sterling total return basis, as we discuss here.

William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

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