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JPMorgan Brazil gives up

JPMorgan Brazil gives up – JPMorgan Brazil has published results for the year ended 30 April 2020. The total return on net assets was -31.3%, compared with -33.2% returned by the benchmark, the MSCI Brazil 10/40 Index. However, since 30 April, the net asset value has risen by 40.0%, against an increase of 32.7% in the benchmark index. Over this period the Brazilian Real has risen by 2.7% against sterling, compared with a fall of 25.9% over the course of the financial year. There is no final dividend.

Continuation vote

Shareholders will be asked at this year’s AGM whether they want the company to continue. The board has decided to recommend that shareholders vote against that resolution – i.e. in favour of winding up the company.

[JPMorgan Brazil is too small and it has been too small ever since it was launched. The acronym was coined a decade ago and, for a while, BRICs strategies were in vogue – Brazil, Russia, India, China and South Africa were seen as the coming global economic giants. Many of them have not delivered on that hope. Last year, in the face of a continuation vote planned for 2019, JPMorgan Brazil’s board asked investors for more time. The managers had lagged the benchmark by 20% since launch but things seemed to be looking up – COVID-19 dashed those hopes. The revival of the last few months has come too late. At last night’s close, the shares were on a 10.6% discount – this represents some potential upside on a liquidation but remember there are costs associated with this – it is not pure upside.]

Normally, we would reproduce the drivers of performance here but the see-saw nature of markets during the period and since would make that academic. The managers do acknowledge that their stock selection took 1% off returns during the year under review.

Brazil is a coronavirus hotspot and this overshadows everything else that is going on in the country. The manager’s outlook statement makes for interesting reading – this will be reproduced in full in our next economic and political outlook – which should be available early in the week after next.

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