JPMAM overhauls behavioural investment process
Group alters its investment process to better cope with ‘market stress’.
JPMorgan Asset Management has overhauled its $15bn (£9.2bn) European and UK equity behavioural finance investment process by adding a ‘quality’ element to its stock screen.
The group said the ‘quality’ screen would sit alongside the firm’s existing ‘value’ and ‘momentum’ factors.
The third screen is aimed at helping managers better deal with top-down macro-economic concerns, such as the ongoing eurozone crisis and slowing global growth, which have become greater drivers of markets in recent years.
The moves came after Investment Adviser reported in February that just two of the group’s 30 UK-based funds with a five-year history outperformed their relative sector average and one fund matched it.
Mike Parsons, head of UK fund sales, said the quality screen was aimed at improving the funds’ performance in volatile markets, especially because in an increasingly macroeconomically driven world investors “want to be in safe defensive stocks irrespective of price”.
“What we were finding is in times of market stress our process meant we were underperforming,” he said.
“When there was a worry about a political event or a crisis in the sovereign debt markets we were finding trying to buy cheap stocks with earning growth was not effective over short periods of time.
“If there has been a concern about Greece, for instance, investors have piled into defensive stocks irrespective of the fact they were already expensive.”
The quality screen will aim to identify companies with sustainable earnings and disciplined capital management.
The change to the investment process is applicable across the group’s three European and nine UK equity funds, including the £275.6m UK Higher Income fund and the £97.8m Europe fund. The changes were implemented in the second quarter.
Mr Parsons said the group expected the alteration to the investment process to reduce drawdowns by half on its growth and core mandates as well as improve outperformance.