During the six months ended 31st August 2016, the total return on JPMorgan Income & Capital’s shareholder’s funds was 6.3%, compared with a return of 12.4% recorded by the composite benchmark (comprising 90% FTSE 350 Index and 10% Bloomberg Barclays Global Aggregate Corporate Bond Index in sterling terms). The Board has declared two quarterly interim dividends of 1.8p. The Board intends, in the absence of unforeseen circumstances, to maintain the current level of quarterly dividends for the remainder of the financial year ending 28th February 2017.
The report says the performance resulted from the portfolio having too much domestic exposure and therefore missing out on the ‘post-Brexit’ rally in UK stocks with overseas earnings prompted by the decline in the exchange rate. In addition, some of the domestic focused shares that the company holds experienced very sharp falls immediately following the ‘Brexit’ vote. The portfolio remains predominantly invested in equities and therefore a rise in bond prices during the period also reduced the relative performance against the benchmark.
The managers say the poor performance was predominantly a function of a large rally in mining shares, and emerging market exposed companies such as Standard Chartered Bank which they did not own. Secondly, returns were hurt by the impact of the ‘Brexit’ referendum result on holdings in the house construction, retail and media sectors. For instance, Taylor Wimpey which is a long term holding in the portfolio, fell 40% in the two days subsequent to the referendum.
JPI / JPIU : Domestic focus constrains JPMorgan Income & Capital