Advisers should heed concerns about a JP Morgan investment trust after its rating was downgraded by Morningstar.
In a note, Morningstar revealed it downgraded the JP Morgan Smaller Companies Investment Trust and the JP Morgan UK Smaller Companies fund from its silver analyst rating to bronze.
The note said: “The fund’s process, in line with others managed by the JP Morgan European behavioural finance team, seeks exposure to companies with price and earnings momentum, value and quality.
“However, the fund manager, Georgina Brittain, has had difficulty in obtaining the factor exposures sought by the process within the UK small-cap universe in recent years, which has slightly reduced Morningstar’s conviction here.”
The note said Morningstar still believed the funds had merit for investors seeking UK small-cap equity exposure.
The investment trust aims to give investors access to fast-growing smaller companies involved in the UK economy.
It can use fledgling or Aim-listed stocks to boost returns but has controls to manage the risks of smaller company investing.
Right to reply
A JP Morgan spokesman declined to comment.
Melanie Wray, IFA for Lancashire-based Anne Wray Independent Financial Adviser, said: “Whether it is small-cap or large, a lot of investment choice comes down to the risk associated with the investment and how much risk the investor is willing to take.
“Investment trusts tend to be associated with more risk than, for example, your standard unit trust.”