(Update) JPMorgan American (JAM) is replacing its lead fund manager Garrett Fish and moving to a hybrid growth-and-value strategy under two fund managers in a bid to revive investor interest in the investment trust.
Although performance of the £949 million listed fund - the biggest in the small North America sector - has generally held up against the US stock market, investor demand has flagged. The shares trade nearly 5% below net asset value (NAV) requiring the trust to recently pick up the pace of its share repurchases in order to narrow the discount, said Simon Crinage, head of investment trusts at JPMorgan Asset Management.
The shake-up will see Fish, who has managed JAM’s large company portfolio since 2002 with a behavioural finance strategy, stay with JP Morgan but move to a client-facing role.
The large-cap portfolio, which currently represents 99% of the trust’s assets, will move to Jonathan Simon and Timothy Parton, senior members of JP Morgan’s US Value and Growth teams, who currently run the Luxembourg-based $2 billion JPM America Equity fund.
Although each manager will buy stocks separately, the portfolio will be more concentrated with the number of equity holdings reduced from the current 62 to 30-40.
The changes are subject to shareholder approval at the trust’s annual general meeting in May. They do not affect its US smaller company portfolio run by Eytan Shapiro.
As a sweetener to the overhaul, JP Morgan has agreed to overhaul its fees. A performance fee that is payable if the fund manager beats the US index is dropped, although it has not been earned for many years. In addition, the group is waiving its annual managment charge for nine months to make up for earlier underperformance.
When the trust resumes payments in a year’s time, it will do so on a new tiered basis, paying 0.35% a year for the first £500 million of net assets, falling to 0.3% and 0.25% on amounts above £500 million and £1 billion.
Chairman Kevin Carter said: ‘The board believes a more concentrated investment approach for the company’s large-cap portfolio, containing the best ideas from the manager’s growth and value investment teams, will offer attractive prospects for the company going forward.’
Crinage said JAM would remain a ‘core’ US fund but with a ‘bit more zest for the portfolio’.
In recent years Garrett’s approach had come under review with the board requesting him to take slightly bigger bets and to take profits more quickly in order to compete with lower-cost index-tracking and exchange-traded funds.
Over five years JAM shareholders have received a 99% total return, above the North America sector average of 93.9% but below the 110% from the S&P 500, the main US stock market index.
However, in the past year it has faced new competition from Baillie Gifford US Growth (USA) which trades at a 2.5% premium after a successful £173 million launch 12 months ago.
Carter said the overhaul was not a response to the 14% fall the trust suffered in the fourth quarter of last year when stock markets endured their worst sell-off since the eurozone debt crisis in 2011. He said the board had begun to look at its options in September and October when JP Morgan indicated that Fish would take on a new role.
Simon joined Robert Fleming, which JP Morgan later acquired, in 1980 as analyst after graduating in mathematics from Oxford university. He moved to New York in 1983 and now heads the group's US value team. Parton, an economics and accounting graduate from Bristol university, joined Robert Fleming in 1986 and has spent a carer mostly running US mid-cap growth funds.