The JPMorgan Multi Asset Trust (MATE) aims to achieve an annualised return of 6% p.a. over the market cycle by investing across various asset classes, principally equities, bonds and infrastructure. Returns are expected to be derived from both income and capital growth, with a target of 4% income yield and 2% capital growth.
The managers, Katy Thorneycroft and Gareth Witcomb, draw on the extensive resources at JPM to build a portfolio that can achieve these targeted returns within the defined volatility range. They aim for volatility to be two thirds that of global equity markets. Using their internal Long-Term Capital Market Assumptions (LTCMA), JPMorgan expect this to result in an annualised portfolio volatility of between 8-12% over the longer term. Realised volatility has been even lower than this, while the return targets have been met.
Katy and Gareth utilise the wide Multi-Asset Solutions research capabilities at JPMorgan, with significant input from both qualitative and quantitative teams. Their starting point is a strategic asset allocation framework, founded on the LTCMA which provides 10-15 year estimates of risk, return and correlations between over 50 asset classes. Over the shorter term, they apply an active asset allocation overlay, adjusting their exposure in line with the team’s latest macro thinking.
Presently the trust is yielding 4.3%. It has paid a quarterly dividend of 1p per share in line with target since launch. By our calculations, the dividend is covered by the current portfolio yield; the portfolio is being managed with both income and capital appreciation in mind, but the managers would aim for dividends to be covered on an ongoing basis from income.
MATE currently trades on a discount of 9.6%; whilst the trust has a short track record, having only launched in March 2018, this is substantially lower than has ordinarily been the case, with the trust having on average traded on a discount of 6.3%.
There is presently no gearing in place on the trust, beyond some small amounts incurred through the use of derivative products to better manage risk and relative market exposures.
In our view, this is a product which would function well as a core holding for retail investors, taking much of the challenging asset allocation and stock selection decisions in-house. The ability to allocate extensively to risk assets should help income distributions maintain their real value, though a sharply inflationary environment would clearly be a challenge to this. The internal allocation of a significant portion of the trust helps to avoid double-layering of fees and ensure that the mandate assigned is in alignment with the managers’ aims.
|An attractive yield of 4%, drawn from diverse sources
||The relatively small size of the trust will exclude some buyers
|Very well-resourced team with a significant amount of depth in analytical input
||Will not suit investors who want to control their asset allocation
|The discount is attractive for a relatively conservative book of assets