JPMorgan European Smaller Co. Kepler Trust Intelligence: New Research

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JPMorgan European Smaller Co.

29 April 2019

JPMorgan European Smaller Companies: New research

29/04/2019

-- With a rebalanced portfolio, JPMorgan European Smaller Companies (JESC) offers a portfolio poised for rising market volatility...

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JPMorgan European Smaller Companies (JESC) aims to provide capital growth from a diversified portfolio of smaller companies in developed Europe, excluding the UK.

The GBP667m trust (in net asset terms), is managed by Francesco Conte and Edward Greaves and utilises a high-conviction, bottom up, stock picking approach. The team focus on three key characteristics when conducting fundamental analysis on new investment ideas; quality, momentum and value. Companies they select do not need to score well on all three characteristics, but the overall portfolio should have a positive tilt to all three.

Over the longer term the trust boasts a strong track record. Over the past five years to 17(th) April 2019 for example, according to Morningstar the trust has delivered NAV returns of 70.7%, considerably greater than the benchmark EMIX Smaller European Companies index (52.4%) and the AIC European Smallers peer group (62%). Comparing the trust to open-ended peers in the IA OE European Smaller companies sector, it has also done a good job, outperforming the IA sector average by more than 11%.

More recently, as economic lead indicators deteriorated through 2018, the managers tilted the portfolio towards more defensive stocks, and de-geared. This led the managers to hold as much as 3.5% net cash in Q4 of 2018. Initially this helped them outperform a falling market at the start of Q4, but in retrospect they were too early to buy back into a falling market, which meant that overall they marginally underperformed the benchmark in a more volatile year.

Despite the strong long-term track record, the discount remains wide in absolute terms, but also relative to peers, and currently sits at around 14%.

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April 29, 2019 02:08 ET (06:08 GMT)