Convertibles offer investors bond-like characteristics in falling equity markets with the potential to participate in rising markets.
JP Morgan said that the company structure will allow greater freedom to invest in new issues, and small and mid-cap issues where liquidity constraints restrict the ability of rival open-ended funds to invest. A closed-ended fund also offers investors the potential for predictable, steady income in a low-cost structure.
The aim is to provide investors with exposure to a breadth of strategies and to the full range of the global convertible bond universe, including the important new issue market.
JP Morgan said this is an area of the market that existing open-ended funds cannot fully capitalise on because they need to carry liquidity.
Antony Vallee, head of convertibles for JP Morgan AM, said: “There has been a growing interest in convertible bonds as investors search for yield. This, coupled with the rising trend where established companies around the world turn to convertible bonds as a way of raising cash, means that we believe the time is right for this investment company. This is global equity income for the cautiously optimistic.
“With the developed world facing a fourth round of quantitative easing happening in the US and new measures to tackle the sovereign debt crisis in Europe, we believe investors can look to convertibles to provide them with a well-diversified global portfolio and comfort in an unsure market. For some investors convertibles are becoming an attractive financial instrument to allow them to take a step from bonds to equities.”
Steve Laird, senior partner at Belfast-based Carrington Wealth Management, said: “JP Morgan’s track record in convertibles is middle-of-the-road at best. I do wish that fund managers would concentrate on improving the performance of their existing funds – or at least reduce the cost if that proves too difficult – rather than launching new ones. This is another me-too fund picking up on a current perception, among some, that convertibles are a good halfway house between fixed interest and equities.”
The annual management charge is 0.75 per cent. The issue price will be 100p. There is no maximum investment. The minimum investment amount is unavailable at present as it is still subject to change.
JP Morgan AM is seeking to fill a gap in the market but whether mid-recession is the right time for a new investment vehicle is debatable, and certainly hard-pressed brokers do not seem overly impressed.