Investments  

JPMAM sideline IPOs in ‘non-year’ for trusts

JPMAM sideline IPOs in ‘non-year’ for trusts

JPMorgan Asset Management (JPMAM) is hoping to overcome a “non-year” for investment trusts, with an eye on expanding and diversifying its range in the near future.

The fund house’s head of investment trusts, Simon Crinage, lamented 2016 and its tough setting for the listed vehicles.

He said the firm would look to launch more trusts focused on illiquid assets, but a dismal year for initial public offerings (IPOs) in the industry had delayed any such plans.

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The market turbulence at the beginning put many off launching new products, including JPMAM, and widening discounts have pushed a number of trusts to pursue share buybacks.

Many are also waiting for the outcome of the UK’s referendum on its membership of the EU before making any moves.

Mr Crinage said: “IPOs just haven’t happened yet; you’ve got that lull.

“If there’s going to be any activity I would have thought potentially you’ve got that window September through to October, but I think a lot of people’s minds are going to be on the impact of the US election. It’s a challenging year.”

He said JPMAM would expand further into alternative trusts in the future once the market picked up again.

The firm currently offers 24 investment trusts, most of which are equities-focused, making it the largest provider of the vehicles in the UK by number and size.

Mr Crinage said when the company does expand its product base, it would likely be a trust focusing on alternatives, such as credit, mortgages, debt or infrastructure.

“We’re really quite keen to diversify our book of business into alternatives. If we are going to launch products, it’s in that space,” he said.

“Most of the money raised in IPOs last year was in alternatives, and it’s an area where JPMorgan has significant strength. We’re quite keen to get into that space.”

Infrastructure appears particularly appealing, with figures from Numis Securities showing such trusts are trading at an average 10 per cent premium to net asset value and yield an average of 5.2 per cent.

Mr Crinage said: “[Infrastructure is] a long-term investment that’s uncorrelated with equities and it’s providing a very attractive dividend yield.

“It plays fantastically well into the closed-ended structure too, because it is completely illiquid.”

The uncorrelated nature of infrastructure vehicles to equities would appeal to investors’ demand for products that diversify their risk, as well as adding breadth to JPMAM’s equity-heavy investment trust offering, he said.

However, the size and illiquidity of the underlying assets make launching an infrastructure vehicle difficult and time-consuming.

“We have a strong real assets group at JPMorgan, but to launch a product like this you need a portfolio of infrastructure assets,” Mr Crinage said.

“You can’t just launch a fund full of cash and say it’s going to buy something.