Interactive Investor

ii Super 60 fund JP Morgan European Investment Trust under review

26th November 2020 16:14

Myron Jobson from interactive investor

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Factors such as recent performance lie behind the revision.

The inclusion of JPMorgan European Investment Trust (LSE:JETI) – income pool on interactive investor’s Super 60 rated list has been placed under formal review following an extended bout of underperformance.

The investment trust, which currently features on the ii Super 60 list as European equities income option, has been under enhanced monitoring since March 2020 for performance concerns. Over five years, the trust delivered an 18% market return (to 24 November 2020), which is below its MSCI Europe Ex UK benchmark (59%) and the AIC Europe sector (66.3%). 

Short-term performance has also been struggling with the trust being down -11.5% on a share price total return basis year-to date and -12.3% over one year, compared to 4.6% and 5.4% respectively for the benchmark index over the same time periods (to 24 November 2020).

The investment trust currently offers an attractive dividend yield of 5.41% and the managers forecast 6.1% as at the financial year end on 31st March 2021. However, going forward, we believe this level of income may not be sustainable, considering that corporate earnings have been under pressure due to lockdowns and lower economic activity. 

In addition, the attractive dividend yield did not manage to offset the losses in share price total return.

Dzmitry Lipski, Head of Fund Research, interactive investor, says: “This investment trust has a unique proposition, with two portfolios of assets. One is income-oriented (which we rate on Super 60) and the other is designed to produce capital growth. Shareholders in either of the two portfolios can convert some or all of their shares into the other on an annual basis every March, without incurring any liability to capital gains tax. From a portfolio construction perspective, the trust has a well-diversified portfolio of around 270 stocks.

“However, we decided to put this trust under formal review due to an extended period of unsatisfactory performance. In-line with our methodology, the review process includes analysis of the trust’s portfolio positioning and outlook as well as sector and peer group assessment. 

“We will also communicate with the fund managers and try to establish whether the problems are more down to the individual strategy or are more market-related in nature. In addition, as this is an income rated option, we will also pay attention on the sustainability of future dividend payments.”

The formal review is in line with our Super 60 methodology, which is monitored continuously for ‘red flag’ events. Examples of such events include, but are not limited to, fund manager moves, soft closures or a major re-rating from external or internal sources.  

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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