JPMorgan senior loans trust set for December launch

JPMorgan Asset Management is to launch the JPMorgan Senior Secured Loan Fund due to overwhelming support from potential investors, Simon Crinage, the group's head of investment trusts, has said.

The Guernsey-domiciled, closed-end fund will have around 80% of its portfolio largely focused on the US and Canada. The trust will be hedged into sterling to neutralise currency movements and will have a diversified portfolio of senior secured loans together with high-yield bonds and distressed credit of mainly US companies.

Crinage highlights loan portfolios cannot be held in open-ended fund structures such as opened ended investment companies (OEICs) and SICAVs, making the closed-end investment company structure ideal.

There is a management fee of 0.75% and no performance fee. The senior loans fund will target an initial dividend yield of 5% on the issue price of £1.00 per share. The group aims to raise at least £100 million at launch.

JPMorgan Senior Secured Loan investment company will be managed by a team headed by Cincinnati, Ohio-based Jim Shanahan, who has been specialising in US senior secured loans for over 25 years. JPMorgan's high-yield team had assets under management of $35.9 billion (£22.37 million) as at 31 July 2013.

The manager explains it is a 30-year-old asset class and three of the four portfolio managers working with Shanahan have managed high yield together through three recessions and numerous market cycles.

The current portfolio is overweight "B" rated debt at 64.7% compared to 39.6% average of the Credit Suisse Leveraged Loan Index benchmark and underweight "BB and higher" rated debt 27.6% compared with 49.1% of the benchmark.

Shanahan explains the closed-end structure allows him to act "opportunistically". He believes the stable asset base supports the ability to deploy money at the most opportune time in the market.

The group began marketing the new investment trust in September and it is currently open for offers. Panmure Gordon is the broker to the launch. The group expects shares to be admitted to trading on the London Stock Exchange in early December.

The new closed-end fund will be differentiated from a similar London-listed fund, Neuberger Berman Floating Rate Income, as the JPMorgan fund will focus primarily on the deep and liquid US leveraged loans market. The £851 million Neuberger holding was launched on 20 April 2011 and it holds 52.7% B rated debt, 35% BB rated debt, 4% CCC rated debt and 2% BBB rated debt. Also domiciled in Guernsey, the fund is yielding at 3.38% and trading at a 3.9% premium. Over one year, it has returned 7.16% compared with an average of 7.10% in the Debt sector as at 13 November.

In June JPMorgan launched a similar closed-end offering in the fixed income space, JPMorgan Global Convertibles Income, raising £136 million.