InvestmentsMay 7 2013

JPMAM seeks £100m for convertible trust

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ByEleanor Lawrie

JPMorgan Asset Management (JPMAM) has said it is confident its second attempt at launching a convertible bond investment trust will receive sufficient interest as income from the asset class reaches pre-recession levels.

The group, which announced the trust’s launch last month, is aiming to raise £100m for its Global Convertibles Income trust run by Anthony Vallee and said investor feedback had been “pretty good” so far.

Five years ago, the company looked at launching a similar proposition but amid a dearth of investor appetite, as the global economic crisis rumbled on, it shelved the plans.

The trust launches in June and will invest in convertible bonds, which can be converted into a set amount of a company’s equity at certain periods. This can provide potential equity-like returns from a security with bond-like protection.

Mr Vallee runs an offshore open-ended convertibles product for JPMAM and Jupiter has seen success with Miles Geldard’s €745m (£628.6m) Global Convertibles Sicav.

But this is the first investment trust to launch targeting convertible bonds. Mr Vallee said JPMAM had an advantage because of its established investment trust stable.

The manager said companies such as advertising giant WPP and supermarket group Sainsbury’s were issuing convertible bonds with the levels of yield seen 10-15 years ago.

“What we are offering is like convertibles from the past,” the manager said.

The manager said the trust would look to implement a discount control mechanism by purchasing shares if the discount to the net value of the trust’s assets reached 5 per cent.

The trust launch in numbers

£100m - The minimum amount of money the trust is hoping to raise in its placing and offer for subscription this month

4.5% - The level of dividend yield the investment trust is targeting in its first year

5% - The discount to net asset value which would prompt the board to consider a share buyback

72 - The indicative number of securities the trust will hold in its portfolio, when it launches in June