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JPMorgan Smaller Companies’ board calls for more conviction from manager

JPMorgan Smaller Companies’ board calls for more conviction from manager – JPMorgan Smaller Companies says that, for the year ended 31 July 2017, the total return on its net assets was +31.0%, compared with +23.4% recorded by the benchmark index. However, the return to  shareholders was +28.7%, reflecting a widening of the share price discount to diluted net asset value from 20.5% to 22.3%. The Directors are recommending a final dividend of 23.0p per share, 25.7% higher than the 18.3p paid last year.

Over the last three years, the total return from net assets has been +39.0%, compared with a +39.3% return on its benchmark. During the last twelve months, the Board has undertaken a detailed review of the manager and their approach, and challenged them on past periods of underperformance. Yhey say that, whilst there has been a marginal level of underperformance over the last three years, the Board has accepted that this is consistent with the manager’s style and approach, and is part of the cyclical nature of markets. The Board has encouraged the manager to place greater commitment behind their best ideas, and to this end has decided to increase the stock, sector and underwriting limits to ensure that these are not an impediment to backing their judgement.

The managers say that the key to outperformance over the year was stock selection. Among the strongest performers were large positions in both Fevertree Drinks and OneSavings Bank (both of which they have owned since the initial public offering (‘IPO’)). Other strong contributors included a holding in Victoria, the carpet manufacturer, and a more recent purchase, Microgen, a software company. On the negative side, two of the main detractors, Plus500 and NAHL, were both hit by regulatory changes (although they point out that they have made over nine times the original investment at IPO in Plus500).

JMI : JPMorgan Smaller Companies’ board calls for more conviction from manager

 

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