JPM Fund Manager

Brittain on Brexit

Georgina Brittain discusses the changes she has seen in the mid- and small-cap space since Brexit

Go to the profile of Georgina Brittain
Sep 20, 2017
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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.

Read more about the JPMorgan Mid Cap Investment Trust plc

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.  

Read more about the JPMorgan Mid Cap Investment Trust plc >

  

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.

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Go to the profile of Georgina Brittain

Georgina Brittain

Fund Manager, JPM UK Smaller Companies Fund and the JPMorgan Smaller Companies JPMorgan Mid Cap Investment Trusts, J.P. Morgan Asset Management

Georgina Brittain is portfolio manager of the JPM UK Smaller Companies Fund and the JPMorgan Smaller Companies JPMorgan Mid Cap Investment Trusts within J.P. Morgan Asset Management's UK Equity team.

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