JPMorgan's American Investment Trust's (Ticker: JAM) benchmark is having a ball. The S&P Composite index is dancing to dizzy heights within 1 per cent of its all-time peak, but the trust - historically a robust performer - is struggling to keep up.
Markets have risen in recent months, with the S&P Composite up 45 per cent since October 2011, driven by significant gains for lower-quality/higher-beta stocks. This has led to a dash for trash among investors. But this trend has tripped up JPMorgan American which, conversely, continues with a focus on quality and reasonable value stocks.
It's a trust that aims for capital growth and seeks to outperform the S&P 500, principally using stock selection. That's done by using a quantitative screen to narrow down potential stocks from a universe of 1,100, after which the investment team assesses a number of criteria to make the final picks. Its manager, Garrett Fish, is experienced and has run the fund for over a decade (since 2002).
This turn of events is not ideal but does not spell disaster for the fund. Alan Brierley, director, investment companies, at Canaccord Genuity, is still happy with it as a core holding: since October 2002 the price total return is comfortably the highest of 45 UK domiciled US equity open- and closed-end funds (ex small caps), and the NAV total return comes in at an impressive third place.
It's also 109 per cent geared, which will serve it well in a rising market, according to Stephen Peters, analyst at Charles Stanley.
Meanwhile, Mr Brierley says in light of macro concerns and the distorting impact of quantitative easing on JPMorgan American's gearing models, he is expecting the manager to increase the amount of cash the fund holds to protect its capital, as he has the ability to increase exposure to 5 per cent of NAV.
Its ongoing charge of 0.73 per cent is well below the average unit trust or open-ended investment company at between 1.6 and 1.7 per cent, and not far off tracker fund levels. It does levy a performance fee of 10 per cent of the outperformance of the S&P Composite, but this is capped at 0.25 per cent of your investment. These exceptionally low charges give its performance an extra leg up.
JPMorgan American's steely performance earned it a place in our Top 100 Funds list. It is one of just seven funds that have actually managed to outperform the S&P Composite since 2002. Including US domiciled funds, JPMorgan American is ranked in the second percentile out of 246 funds invested in this area. Even after lagging the market recently, this fund is still a high flyer.
JPMORGAN AMERICAN INVESTMENT TRUST (JAM) | |||
| PRICE | 1080p | GEARING | 109% |
| AIC SECTOR | North America | NAV | 1,059.05p |
| FUND TYPE | Investment trust | PRICE PREMIUM TO NAV | 1.31% |
| MARKET CAP | £553.2m | 12 MONTH AVERAGE PREMIUM | 1.29% |
| SET UP DATE | 1881 | YIELD | 1.16% |
| ONGOING CHARGE | 0.73% | MORE DETAILS | http://am.jpmorgan.co.uk/ |
Source:Morningstar
Performance data
| Fund | 1-year performance (%) | 3-year performance (%) | 5-year performance (%) |
| JPMorgan American | 15.07 | 32.69 | 66.55 |
| Source: Morningstar, 2 April 2013 | |||
TOP TEN HOLDINGS as at 28 February 2013
| Apple | 3.6 |
| Exxon Mobil | 3.4 |
| Microsoft | 2.8 |
| Berkshire Hathaway B | 2.6 |
| Pfizer | 2.5 |
| IBM | 2.2 |
| Philip Morris International | 2.2 |
| Merck | 2.2 |
| Qualcomm | 1.7 |
| United Technologies | 1.6 |
