BULL POINTS:
■ Experienced manager
■ Exposure to emerging markets consumption story
■ Global, diversified fund
BEAR POINTS:
■ Currency risk
■ High fund costs
Humans are inherently aspirational, and nowhere more so than among the growing middle classes in emerging markets. The JP Morgan Global Consumer Trends Fund is a play on growing worldwide consumption and changes in consumer behaviour. Although it's too young to have a meaningful performance record, it does have a wide remit and no direct competition.
IC TIP RATING | |
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Tip style | Growth |
Risk rating | High |
Timescale | Long term |
The fund specifically targets opportunities in consumption driven by three themes: aspiration, demographics and urbanisation, and health & wellness.
Although the most dramatic shifts in consumption trends are taking place in emerging markets, as their citizens become wealthier, the fund does not limit itself to only these countries; indeed, the US and UK account for half the geographical allocation. All investment avenues are explored, regardless of size, sector or location. That's reflected in the fund's holdings, which include companies as diverse as fashion label Guess, drug developers Abbott and Sanofi-Aventis, technology titan Cisco and food group Nestle.
In the west, many people are taking better care of themselves through the consumption of health supplements and organic food, while in emerging markets investment prospects lie at the lower end of the spending scale. For example, the UK has 1.7m babies and 90 per cent of them are wearing disposable nappies. In China, there are 40m babies and fewer than than 10 per cent of them are in disposables - making the capacity for growth considerable. Then there is also the rise in aspirational spending, with Western luxury brands increasingly popular in the emerging world, particularly in China.
The relative resilience of global consumption has helped the fund turn in a strong performance despite it being launched on 7 April 2008, just ahead of the meltdown in global markets. It has returned 50.3 per cent from launch to 31 December 2010, compared with 15.4 per cent from the MSCI World Index over the same period. Over the past year the fund's performance has been solid, posting a return of 15.3 per cent. The fund's unconstrained nature means it can not be 'pigeon-holed' into a particular sector and there is no global index against which its performance can be benchmarked. Other than a select few funds focused on investing in luxury branded industry as a way of playing changing global consumption patterns, the JPM Global Consumer Trends Fund is a unique offering.
While this is a higher risk play, it can be an attractive equity strategy to complement an existing core portfolio, but a longer-term investment timeframe (at least five years) is advisable. The manager, Peter Kirkman, has been with JP Morgan since 2001 and was previously at Fleming Japan.
Caveats are the fund's total expense ratio of 1.9 per cent, which is a bit pricey, but so far justified by its performance record. Also, with the underlying assets of the fund denominated in a various currencies and not hedged, there is also the issue of currency risk to consider.
Key fund data:
JPM GLOBAL CONSUMER TRENDS FUND A ACC (C5GCY) | |||
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PRICE | 73.20p | SHARPE RATIO | 0.12 |
SIZE OF FUND | £86.6m | 3-MTH PERFORMANCE | 1.12% |
No OF HOLDINGS | 76* | 6-MTH PERFORMANCE | 11.04% |
SET UP DATE | 7 April 2008 | 1-YR PERFORMANCE | 15.35% |
MANAGER START DATE | 7 April 2008 | TOTAL EXPENSE RATIO | 1.9%* |
BETA | 0.5 | YIELD | 1.05% |
VOLATILITY | 1.83 | MINIMUM INVESTMENT | £1,000 initial, £100 thereafter |
TRACKING ERROR | 1.8 | MORE DETAILS | jpmorganassetmanagement.co.uk |
Source: Investors Chronicle funds data, JPMorgan, Morningstar*
Notes: Performance figures as at 7 February 2011
Top 10 holdings as at 31 December 2010
Holding | Percentage |
---|---|
Total | 3.0 |
Nestle | 3.0 |
Hewlett Packard | 2.7 |
Cisco Systems | 2.7 |
Sanofi-Aventis | 2.5 |
Abbott Laboratories | 2.3 |
Guess | 2.3 |
Vodafone | 2.2 |
Merck & Co | 2.2 |
China Hongxing Sports | 2.1 |
Geographic allocation
Country | Percentage |
---|---|
US | 36.2 |
UK | 14.0 |
China | 13.4 |
France | 8.8 |
Switzerland | 7.1 |
Other | 20.5 |