Research History

JPMorgan Russian Securities

JRS has benefitted from a dramatic recovery in the Russian market…

Disclosure – Non-Independent Marketing Communication

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

JPMorgan Russian Securities (JRS) aims to generate long-term total returns from investing in cash- generative businesses in Russia. Managers Oleg Biryulyov and Habib Saikaly aim to identify national champions which can grow through exposure to international markets; and to avoid those areas of the market with poor corporate governance.

In recent years the performance of the trust has been extremely strong in absolute terms. Over five years the Russian market has made impressive gains, massively outperforming the MSCI Emerging Markets index. This has been helped by the recovery in the oil price after its collapse in 2014, as well as pressure from sanctions proving to have a limited effect. Investors who hold only generalist funds are likely to have seen very limited benefit from this rally, as the market has shrunk to just 4% of the Emerging Markets index. JRS has outperformed the Russian market over that period (to 20 January 2020), as we discuss in the Performance section. In the managers’ view, as corporates and households have de-levered substantially, they should have the ability to spend and keep up the momentum in the economy.

Despite its strong run, the managers observe that the Russian equity market still remains extremely cheap relative to peers. The forward P/E of the MSCI Russia index is 6.7, just over half that of the MSCI Emerging Markets index at 12.8. Meanwhile JRS is on an 11.2% discount, wider than the average of 9.1% in the AIC Global Emerging Markets sector.

The yield on JRS’s shares is 4.6%, having been boosted in recent years by the Russian government’s demand that companies increase their payouts to shareholders. This is motivated partly by the fact that the Russian state is a shareholder in many of the largest companies in the market, and partly by a desire to counteract foreign shareholders’ concerns about investing in Russia. Both the management team and the board are convinced we have seen a secular shift in culture and further dividend growth is to be expected. As a consequence, the trust’s objective has shifted to providing a total return rather than just capital growth.

Thomas McMahon
Thomas is a senior investment trust analyst and joined Kepler in April 2018. Previously he was senior analyst at FE Invest, where he was responsible for fund selection for a range of model portfolios. He covered all asset classes over time, but has particular experience with emerging markets and fixed income as well as UK smaller companies funds. He has a degree in Philosophy from Warwick University and is a CFA charterholder.

Related Research

Key facts

Investment objective

To maximise total return from a diversified portfolio of investments primarily in quoted Russian securities or other companies which operate principally in Russia

As at:

20/02/2020

Trust Name

JPMorgan Russian Securities

Ticker

JRS

Management Company

JPMorgan Asset Management Inc

Manager Name

Oleg Biryulyov; Habib Saikaly;

Association of Investment Companies (AIC) Sector

Country Specialist: Europe ex UK

12 Mo Yield

4.6%

Dividend Distribution Frequency

Semi-annually

Latest Market Capitalisation

£347,355,243

Latest Net Gearing (Cum Fair)

0%

Latest Ongoing Charge Ex Perf Fee

1.33%

Turnover Ratio

21.5%

Shares Outstanding

46,007,317

(Discount) / Premium (Cum Fair)

-11.2%

Daily Closing Price

755p

Source: Morningstar

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

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