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JPMorgan American Trust Replaces Manager

Garrett Fish to be replaced by new co-managers representing growth and value approaches as part of wide-ranging changes to the investment trust

David Brenchley 20 March, 2019 | 2:01PM

JPMorgan American Investment Trust, US stocks, US equities, value versus growth

Garrett Fish will be replaced as manager of the JPMorgan American Investment Trust (JAM) after more than 15 years in charge as the board of the trust announces wide-ranging changes.

Fish, who currently oversees the large-cap side of the portfolio, will be replaced by Jonathan Simon and Timothy Parton, who are part of JPMorgan’s Value and Growth investment teams respectively.

The changes made to the large-cap part of the portfolio of JAM include moving to a higher-conviction approach. Instead of comprising between 60-100 stocks, as it currently does, it will be made up in future of 30-40 stocks.

The large-cap part of the fund represents between 90-100% of the fund’s holdings, with the small-cap portfolio, run by Eytan Shapiro, representing up to 10%. The small-cap side of the trust will not change, JPMorgan said. All changes are subject to shareholder approval and neither JAM’s investment objective nor its benchmark will change.

The more concentrated approach to the large-cap portfolio – “combining the best ideas from the [JPMorgan] growth and value investment teams” – will “offer attractive prospects” for JAM going forward, said chair Dr Kevin Carter.

Combining Value and Growth

The firm said that both the growth and value teams look for companies that are underappreciated by investors and the market.

Value specialist Simon focuses on businesses with durable franchises, shareholder-friendly management and strong free cash flows; growth specialist Parton looks for businesses with large addressable markets, sustainable competitive advantages and a proven record of delivering their business plans.

“These complementary investment styles should provide exposure to diversified sources of alpha as the portfolio managers are choosing names from a wide opportunity set incorporating value and growth names,” the statement read.

The board said it has also negotiated the removal of the performance fee backdated to 1 January 2019 and waived the management fee for a period of nine months from 1 June 2019.

With the well-publicised decade-long outperformance of growth stocks versus value stocks, commentators continue to ring the death knell for value investing. But the more pragmatic would advocate a combination of the two, like JAM is implementing.

“What people have focused on is either value versus growth; I think people need both in their portfolios,” Fiona Harris, US equities investment specialist at JPMorgan, told Morningstar.co.uk last week.

Harris, who is part of JPMorgan’s value team, says a mixture of both styles is the best way to get good returns out of US equities.

Take the fourth quarter of 2018, for instance. Managers looking for quality companies, typically on the value side of the spectrum, did better than their counterparts in the final three months of last year.

“That gave you ballast in your portfolios overall by being diversified. [Within that] people can make asset allocation decisions about how much they give to value managers and how much they give to growth,” adds Harris.

Morningstar Analyst View

Morningstar analysts downgraded JAM’s rating to Neutral, from Bronze, in May as “conviction that the process can deliver dependable outperformance of the S&P 500 [had] diminished”.

However, analyst David Holder notes that the board has now recognised that the current low active share* investment approach has limited opportunity to outperform the blue-chip US index. 

“They are therefore proposing that a more focused approach to US large-cap investment with a balance between growth and value stocks is implemented by an established JPM investment team,” says Holder.

“In our latest review of the strategy we downgraded the rating to Neutral on the basis that the previous approach was unlikely to be able to add value relative to the demanding S&P 500 index.

“We feel that this proposal gives shareholders an interesting option and potentially a more plausible option to outperform the broader US market.”

Holder also notes the change of manager, with Morningstar analysts having positive ratings on both the new managers. Simon currently runs the Bronze-rated JPMorgan US Value fund.

*Active share is the percentage of fund holdings that are different from the benchmark - the more the funds' stocks differ from the benchmark, the higher the active share.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
JPM US Value A (dist) USD28.49 USD0.39
JPMorgan American Ord466.00 GBX-0.11

About Author

David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk

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