JP Morgan’s emerging market trust board explains performance

JP Morgan’s emerging market trust board explains performance

JP Morgan Emerging Markets Investment Trust produced a total return on net assets of minus 6.8 per cent for the second half of 2015.

Over the same period, the return to shareholders was minus 6.2 per cent.

Alan Saunders, chairman of the trust, said 2015 proved to be “difficult for emerging markets” and that the MSCI Emerging Markets Index fell 11.8 per cent in sterling terms, with the investment trust outperforming this benchmark.

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Additionally, the discount on the investment trust’s shares widened from 10.7 per cent to 11 per cent.

Mr Saunders said the board is prepared to take action to ensure the discount does not exceed 10 per cent for an extended period, but only if the discount is out of line with its peer group and market conditions are orderly.

He said: “We are prepared to buy shares in at discounts wider than 8 per cent in order to achieve this, subject to those caveats, and have done so during the period.”

Mr Saunders added the market environment for emerging markets remains challenging, and there can be little doubt that this volatility could continue for some time.

“At some stage, however, the selling pressure will abate and markets begin to recover. While valuations may not have reached capitulation levels, there is no doubt that markets look relatively cheap against developed markets.

“Assuming the long term bull case for emerging markets remains intact, as the board believes it does, then the companies we invest in look good value in the long run.”

Adviser View

Blair Cann, senior partner at M Thurlow & Co said: “As far as I can see there has been a slight improvement recently - last six months or so – but overall the performance is disappointing.

“The five-year figure is minus 5 per cent against a sector average of minus 5.6 per cent but I have lost count of the number of times I have had to point out to providers that pointing out that a fund has outperformed its benchmark because it hasn’t lost nearly as much as most of the others is not a recommended sales pitch.

“Not the time I think to encash but nor would I recommend buying in. No doubt a recovery will eventually take place but the uncertainty is such that I would simply watch for the time being.”