JPMorgan Multi Asset Growth and Income has announced results for the 12 months ended 28 February 2022. Over that period, the company achieved a positive total return of 8.1% on its net asset value, an outperformance of 2.1% for the year, against the reference index (a total return of 6.0% per annum measured over a rolling five year period).
A significant narrowing of the discount (from 12.6% to 4.2%) gave investors a share price return for the year of 18.7%. The shares have since moved to trade on a small premium.
Over the period, 5,828,000 shares were bought back at an average discount of 5.16% and 975,000 more shares have been repurchased since then. We are pleased to see that the elimination of the discount since the year end has allowed the company to reissue 100,000 shares from treasury. Hopefully the company will be able re-expand over coming months.
Inflation-linked income
Four quarterly dividends totalling 4.1p were declared, 2.5% ahead of the previous year. Some of that came from distributable reserves. As announced at the start of the reporting period, the board intends to increase the 2022 distribution by a minimum of the UK’s annual Consumer Price Index (CPI). For the accounting year ending 28th February 2023, the board’s expectation is to pay a total distribution of 4.4p per share. This represents an increase of 7.3% on the 2022 distribution and is intended to help protect shareholders’ distribution income from inflation. The distributions are expected to be paid to shareholders in August, November, February and May.
What drove returns?
The portfolio’s equity exposure was the largest positive contributor to absolute performance. While the trust’s physical global equity portfolio generated strong returns ahead of the broad market, its regional positioning through index futures provided a negative contribution to returns, driven predominantly by an underweight to US equity large cap futures. Fixed income in aggregate was flat while the allocation to infrastructure was a positive contributor over the year.
What did the managers do with the portfolio?
“We made some asset allocation changes through the period as we continued to position the Trust in line with favoured markets and regions. We entered 2021 with a pro-risk stance and maintained the Company’s overweight to equities through the review period, with an average equity weight of 67%. We added further to our equity exposure in December as despite uncertainties around the impact of the Omicron variant, we continued to believe that growth would be above trend driven by strength in corporate earnings growth and balance sheets together with the deployment of household savings.
We scaled this back in 2022 as we sought to reduce the level of active risk given geopolitical tensions, the subsequent invasion of Ukraine and a sharp repricing of inflationary expectations led to a rapid increase in volatility at the end of the financial year.
While stock selection is undertaken by our in-house International Equity Group, we tilt regional positioning to reflect our latest views, implemented via index futures.
We reduced our exposure to emerging market equities in the second quarter of 2021, driven by more attractive growth prospects in developed markets. We significantly reduced our exposure to European equities towards the end of the fourth quarter, tilting the portfolio towards the higher quality US market. We reduced US and further reduced European exposure in January and added a small position in Canadian equity futures reflecting our expectations for strong economic growth.
In the company’s portfolio of fixed income investments, we sold down our exposure to local currency-denominated emerging market debt in April 2021, as our conviction in the asset class faded on the back of slower growth, lagging vaccine deployment and a strengthening US dollar. We added exposure to convertibles as the asset class offers an asymmetric return profile and reduced our exposure to high yield bonds through the year as the scope of spread compression remained limited. We also introduced a total return fixed income strategy to further diversify our fixed income exposure.
Our bespoke equity portfolio which continues to be managed with a dividend focus as a style we currently favour, generated returns in excess of both the MSCI World High Dividend Yield index and the broader MSCI World index. At a sector level, the largest contributors to performance were banks and consumer staples while detractors included utilities and autos. At a stock level, an overweight in Prologis, the US based Real Estate Investment Trust (REIT), was the largest contributor. The company benefitted from the expansion of e-commerce during the pandemic and reported strong results. Our position in Novo Nordisk, the Danish pharmaceuticals company, also contributed to performance. The stock performed very strongly over the period following the launch of the obesity treatment Wegovy and oral diabetes drug Rybelsus, together with strong financial results. In contrast, our position in Adidas, the German sportswear manufacturer, detracted from relative returns. The stock fell after the company saw its growth weaken in the third quarter of 2021 with missed analyst expectations and lowered its sales and profit forecasts for the rest of the year due to the headwinds it faces in China and the global supply chain crisis.”
MATE : JPMorgan Multi Asset to match CPI inflation on dividend