JPMorgan Multi-Asset delivers 5.1% NAV return in inaugural year – JPMorgan Multi-Asset (MATE) has reported its first set of annual results following its launch in March 2018. MATE replaced JPMorgan Income & Capital following the latter’s wind-up.
Over the year to 28th February 2019, MATE’s underlying portfolio performed much better than the shares. Total return NAV increased 5.1%, compared to a 5.3%% return generated by the LIBOR one-month sterling rate plus 4.5% reference index. MATE’s shares were down 3.9% on a total return basis over the year and the discount to NAV has widened since the start of 2019, closing at 8.3% yesterday. It averaged 5.2% over the financial year.
Equity allocation drives NAV total return
MATE’s equity exposure was the largest positive contributor to the portfolio. Within fixed income, high yield was the largest positive contributor to absolute performance while government bonds also added value. By contrast, emerging market debt was the greatest detractor over the period as many emerging market countries have suffered from the ongoing trade war and the strength of the US dollar.
An increased allocation to infrastructure also provided a positive contribution MATE. We note that the company uses the advantages of its investment trust status to invest in less liquid areas of the market, such as by investing over 10% of its portfolio in an unlisted infrastructure fund.
MATE’s return contribution by asset class over the financial year is shown below:
| Asset Class | Return contribution, % |
| Global equities | 4.8 |
| Emerging market equities | (0.4) |
| Infrastructure | 1.2 |
| Government bonds | 0.1 |
| Investment grade | 0 |
| High yield bonds | 0.3 |
| Emerging market debt | (0.2) |
| 5.8 | |
| Ongoing charges | (1.1) |
| Share buybacks | 0.4 |
| Total return on NAV | +5.1 |
Fed pivot good for emerging market assets
Katy Thorneycroft and Gareth Witcomb, MATE’s managers, believe the shift in policy by the US federal reserve (stopping interest rate increases) will increase their opportunity set in emerging markets. They said the following: “From a macroeconomic perspective, we believe that the probability of a recession in the next 12 months remains low. The recent change in policy from the US federal reserve, indicating that it would pause its rate rises for the foreseeable future, should boost global growth and help to extend the eventual length of the business cycle. However, recent measures of economic activity and global business surveys have moderated, which warrants caution.
While equities should be supported by beatable earnings expectations and easy monetary policy, today’s mature, late cycle environment does not offer many catalysts for a strong upside to earnings. The US is our most preferred equity region and Europe our least preferred; we also like emerging market stocks where the potential for a weaker US dollar lends support. A more accommodating US federal reserve means that we have a more positive view on higher yielding assets. Broadly this means being neutral in emerging markets debt and neutral to slightly positive on high yield, absent a recession. We continue to like infrastructure as the sector offers an attractive yield and return profile with stable cash flows and is a good source of diversification.”
MATE: JPMorgan Multi-Asset delivers 5.1% NAV return in inaugural year