JPMorgan Claverhouse (JCH) annual results period to 31 December 2020 brought a -10.8% total NAV return. This compares with a total return for the same period from the company’s benchmark, the FTSE all-share index, of -9.8%. JCH says its returns were caused principally by being geared at the time of the steep market fall in the early part of the year,
Contributors led by JPMorgan Smaller Companies Investment Trust and Games Workshop
JP Morgan Smaller Companies IT: +1.4%
Games Workshop: +1.4%
Scottish Mortgage IT: +0.9%
Intermediate Capital Group: +0.9%
Softcat: +0.6%
William Meadon and Callum Abbot, JCH’s managers noted in their outlook: “More than a year after its outbreak, the Covid-19 virus continues to take a dreadful global toll on both lives and livelihoods. Economic activity has plummeted, government debts have ballooned, and interest rates are nil or, in many cases, negative. This a global challenge like no other.
There are, however, grounds for cautious optimism: a number of seemingly effective vaccines are being rolled out, health services are now coping and, at the time of writing, infection rates are generally falling across the world. Some companies have not survived but others have found themselves well placed for this new world. Encouragingly, we are starting to identify an increasing number of strong, agile companies which are not only surviving the current storm but are well placed to thrive in a post-Covid-19 world.
The Brexit deal was a landmark for the UK. Although the transition is likely to be far from seamless for companies trading with Europe, the end of years of negotiation and uncertainty has led to both sterling and the UK equity market rising in recent months*. The US election result also cleared another geopolitical risk and although a Biden presidency will not be without its challenges for the UK, any de-escalation of the trade wars which characterised the previous administration should provide a much- needed fillip to corporate confidence.
After a disappointing 2020, UK equities now look very good value compared to both their own history and to most overseas markets. As the rollout of the UK vaccination programme continues apace and confidence about an opening of the economy builds, we believe that this value will soon be realised. Our optimism on the outlook for UK equities is reflected in a gearing level at the time of writing of 12.6%.”
JCH: JPMorgan Claverhouse returns held back by gearing during initial sell-off