By Jonathan Jones, Editor, Trustnet, 31 July 2024:
JP Morgan Asset Management is to merge two Japanese equity investment trusts, continuing the spate of consolidation in the investment company sector.
The £163m JPMorgan Japan Small Cap Growth & Income trust will be subsumed into JPMorgan Japanese, creating a £1bn investment company..
Shareholders in JPMorgan Japan Small Cap Growth & Income will be offered a cash exit of up to 25% of the listed shares at a 2% discount to the net asset value (NAV). The trust currently sits on a discount of around 13.5%.
It could take the JPMorgan Japanese trust’s assets under management (AUM) to almost £1bn depending on the uptake of the exit scheme..
It will remain managed by Nicholas Weindling and Miyako Urabe, who have outperformed the average IT Japan peer and the TSE Topix over the past 10 years, as the below chart shows.
The duo can invest across the market capitalisation spectrum and the trusts already have 22 holdings in common, according to Deutsche Numis analysis, with 27% of the JPMorgan Japan Small Cap Growth & Income portfolio already held within the large trust.
However, the large trust has 56 holdings while the smaller of the two has 80 holdings. As such, Lovett-Turner suggested there could be some sales in the near future as the new managers weed out lower-conviction holdings.
Analysts at QuotedData agreed with Lovett-Turner that the merger “makes clear sense”, noting that, from a practical perspective, “it appears that little will change for investors outside of the usual scale and management fee benefits”.
Alexa Henderson, chair of JPMorgan Japan Small Cap Growth & Income, said the board has “considered a number of possible alternatives” for the trust, noting that the deal will “provide continuity of investment process and philosophy” in the Japanese market.
Shares in JPMorgan Japanese were 2.9% higher in early trading after the announcement.
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