The FTSE 100 may have taken a few knocks since the Brexit referendum. But it has also successfully picked itself up and dusted itself down after each and every one, returning 24% vs. the 17% return of the FTSE 250, says Georgina Brittain, co-manager of the GBP 252 million JPMorgan Mid Cap Investment Trust, ranked in the top quartile vs. its peers over one, three and five years1.
As the surprise result of the Brexit referendum drove sterling into a nosedive, the UK’s backbone of internationally-focused FTSE 100 blue chips—most of which derive a significant proportion of their earnings from overseas—drew strength from the currency’s weakness. At the same time, many investors opted to abandon the more domestically-focused mid- and small-cap space—often seen as a barometer of Brexit sentiment—spooked by the prospect of a gradual withdrawal from membership of the European Union.
Keeping investors engaged with the mid-cap space has been one of our biggest challenges since Brexit. But the figures speak for themselves: over three years to 31 August 2017, the trust has returned 55.3%, outperforming both Morningstar Investment Trust UK All Companies return of 28.4% and FTSE 250 index (ex Investment Trusts) benchmark on 33.7% during the period2. In fact, FTSE 250 companies have actually outperformed their large-cap cousins over most time horizons, in a clear testament to the strength, stability and ongoing growth of the companies at its heart3.
Indeed, the FTSE 250 index is home to a host of opportunities to tap into both niche domestic plays and world-class overseas earners—a fact that is reflected in the 55:45 overseas/domestic split of the JP Morgan Mid Cap Investment Trust. What’s more, ebullient merger-and-acquisition activity in the mid-cap space points to some attractive valuations in the sector, including the completion of the WS Atkins acquisition by US engineering and construction group SNC-Lavalin, while another of the trust’s holdings has also received a recent bid from an American name.
After the Brexit vote, we introduced a two-pronged approach which involved reducing exposure to consumer stocks in favour of ramping up holdings that stood to gain from the weaker currency. As bottom-up stock pickers, we took a case-by-case look at each of the trust’s holdings—an approach that meant some consumer services names kept their place in our high-conviction portfolio of 70 stocks, including JD Sports Fashion, the trust's largest position at 4.9% as at 30 June4.
1FTSE data source: Bloomberg as at 31 July 2017.
2Source: J.P. Morgan Asset Management, Morningstar as at 31 August 2017
3Source: J.P. Morgan Asset Management as at 31 August 2017 comparing the FTSE 250 (ex Investment Trusts) vs the FTSE 100 NDR
4The Fund is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. Past performance is not an indication of current and future performance.
For Professional Clients only – not for Retail use or distribution. This is a promotional document and as such the views contained herein are not to be taken as advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you.
It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Both past performance and yield are not a reliable indicator to current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met.
Investment is subject to documentation (Investor Disclosure Document, Key Features and Terms and Conditions), copies of which can be obtained free of charge from JPMorgan Asset Management Marketing Limited. Issued by JPMorgan Asset Management Marketing Limited which is authorized and regulated in the UK by the Financial Conduct Authority. Registered in England No: 288553. Registered address: 25 Bank St, Canary Wharf, London E14 5JP. 354a9a60-899a-11e7-b51d-005056960c63