JPMorgan Emerging Markets Investment Trust (JMG) reported its annual results for the year ending June 2023.
- JMG reported a NAV total return of 0.8%, ahead of its benchmark, the MSCI Emerging Markets Index, which reported a loss of (2.8%) over the same period. Stock selection was the largest contributor to JMG’s returns, adding 4.0%, with the biggest detractor being currency effects, which detracted (2.8%) from performance.
- JMG’s manager notes that the two most notable factors influencing returns have been “change in global financial markets from an era of very low inflation and very low interest rates to one in which both are considerably higher”, and “the gyrations of the Chinese equity market and, underneath it, the Chinese economy.”
- JMG declared a total dividend of 1.65p per share for the full year, a 12.2% increase on the prior year’s.
- JMG continues to trade on a discount, finishing the year on a 9.7% discount, slightly narrower than the 10.3% it started on.
- JMG will switch from a flat management fee structure to a tiered one, with effect from 1 July 2023. JMG’s management fee will be calculated on a tiered basis of 0.75% per annum on the first £500 million of net assets, 0.65% on net assets between £500 million and £1 billion, and 0.60% on net assets in excess of £1 billion. The board estimates that were the new structure to have been in place last year, the ongoing charges ratio would have been 0.78%, below the 0.85% currently reported.
Austin Forey and John Citron, JMG’s portfolio managers, commented:
“While economic conditions matter to companies, growth in earnings and dividends per share are what matter most to us. The best companies combine successful operations with judicious decisions about capital allocation, paying out dividends when they cannot reinvest at acceptable returns. As an illustration of what can be achieved, allow us to finish by writing about a company that we first invested in almost twenty-five years ago, Housing Development Finance Corporation (‘HDFC’). This stock has been a constant in your portfolio since 1998, but merged with its bank subsidiary in July this year, and hence no longer appears in your portfolio in the same form. We first bought the share at around 200 rupees, but subsequent stock splits mean that number should be divided by 10 to give a price in today’s terms of 20 rupees. When the merger was finally concluded in July 2023, the last share price for HDFC was 2,724 rupees. How is that possible? The answer is through the continuous compounding of shareholder value. HDFC’s profits grew 90-fold over 25 years, and its investments in new areas like banking, asset management and insurance yielded further gains for shareholders. Its economics remained impressively constant, with return on equity never falling below 13% in any year. The point here is a simple one: outstanding management in front of a big opportunity can, over time, create exceptional outcomes. Our task is to unearth more companies in the future that can stand comparison to investments like HDFC.
“Knowing what you are trying to do is the most critical thing for any investor, for two reasons. The first, obviously, is that if you do not really understand what you are trying to achieve, it is very unlikely that you will achieve it. But knowing what you are trying to do has a second equally important function, and that is to prevent the pressure of market cycles and performance fluctuations from blowing you off course. It can be very tempting, when share prices fall or performance is challenging, to go for the quick fix, to chase performance and do things that you would not do in other circumstances. As shareholders in this Company, you should neither expect that from your Portfolio Managers, nor excuse it. We remain committed to a long-term approach because we believe investment to be a marathon rather than a sprint. We do not know what the future holds, but we do believe that a consistent process implemented with conviction can always reward investors in the long run.”