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Retail investors plan to vote against JP Morgan Russian Securities mandate changes

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Eve Maddock-Jones, Investment Week, 15 November 2022:

Retail investors in JP Morgan Russian Securities trust are preparing to vote against a proposal to expand the investment universe, on the grounds that it devalues their investment and goes against what they signed up for.

The board of JRS announced last month (27 October) that it wanted to expand its investment opportunities to beyond Russia to invest in equities domiciled in central, eastern and southern Europe (including Russia), the Middle East and Africa, including those markets that are considered as emerging markets according to the S&P Emerging Europe, Middle East and Africa index.

These changes were first hinted at back in July in the trust’s half-yearly report, when management claimed it still had “adequate resources” to stay open, despite its then 95.2% drop in net asset value and as Russia’s invasion of the Ukraine continued, a war now in its ninth month…

Fundraising concerns

One of the key concerns for them was a potential fundraising, which they said would dilute and ultimately devalue their original investment.

JP Morgan attempted to address these anxieties last Monday (7 November), saying here were “currently no plans to issue shares or raise capital”, even if sanctions on the Russian market were totally lifted.

A spokesperson for JP Morgan reconfirmed this to Investment Week…

However, James Carthew, head of investment companies at QuotedData, said they had spoken to JP Morgan and were confident that there would not be a fundraise.

“They and the board understand investors’ wish not to see their Russian exposure diluted,” he said.

Carthew added that he thought it was “strange” for the management to rule out a fundraising, given the new portfolio will be “too small”.

“If the manager does a good job and interest in emerging markets comes back, there would be a good case for having a viable competitor to Barings Emerging EMEA Opportunities,” he said.

But he added: “The important thing is to categorically rule out any dilution of investors’ exposure to Russia – which, as we have explained before, could still be done by creating a new class of Russian shares.”

When asked if they would sell out if the mandate changes are agreed next week, the retail clients said: “I would if the changes are bad on my potential return on investment, but that remains to be seen”.

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