JPM UK Equity Core Fund: More excess returns, less volatility
Andrew Robbens explains why we believe the JPM UK Equity Core Fund is ideally placed to guide investors through any future Brexit-related volatility.
We believe the innovative and competitively priced JPM UK Equity Core Fund is ideally placed to guide investors through any future Brexit-related volatility.
Low cost, low active risk approach
UK stocks are riding high and the outlook appears positive given the strong global backdrop. However, concerns about Brexit remain, with many investors still wary about the potential for volatility as Britain negotiates its departure from the European Union (EU).
In this environment, the JPM UK Equity Core Fund’s low cost and low active risk approach provides the opportunity to share in the UK market’s long-term growth while targeting consistent outperformance through any market turbulence that lies ahead.
The key to the fund’s success is a tried and tested investment approach that looks to reduce emotion in investment decisions. Emotions, such as fear and greed, can cause share prices to diverge from fair value in persistent and predictable ways that can be exploited by rigorous stock research.
With emotions running high since the EU referendum, the fund’s disciplined stock selection and risk management process is well placed to capitalise on the share price anomalies that Brexit may be creating.
Driven by stock selection
The behavioural biases targeted by the fund’s portfolio managers are exploited by taking small overweight positions in attractively valued, high quality stocks with positive momentum within each sector of the market. Small corresponding underweight positions in each sector are taken in stocks that are expensive, low quality and have weak momentum.
The fund’s sector allocations therefore closely mirror the sector weightings of the FTSE All-Share Index (net), which means that any macro news that impacts a sector more broadly will not necessarily impact the fund’s performance relative to the FTSE All-Share index.
Instead, the fund aims to generate small and consistent incremental excess returns driven by positive stock selection within sectors.
Strong track record of outperformance
These small excess returns add up over time. The JPM UK Equity Core Fund has outperformed the FTSE All-Share in every rolling three-year period since the launch of the strategy on 31 March 2009 (based on timing-adjusted returns, which remove any impact from the time difference between when the fund and index are priced)1.
Source: J.P. Morgan Asset Management as of 31 December 2017. Fund inception date is 1 June 1997. Share class E launch date is 1 February 2011. Fund performance is shown based on the NAV of the share class E (acc) in GBP including ongoing charges, excluding any entry and exit charges, with any income (gross ) reinvested. Excess return calculated geometrically. Past performance is not an indication of current and future results.
This consistent outperformance has been achieved with less volatility than the index over one, three and five years—a track record that the investment team are rightly very proud of.
UK equities continue to give investors exposure to the improving global economy. There will be bumps in the road, not least caused by Brexit, but this will create opportunities for active managers with a strong research platform. In this environment, JPM UK Equity Core Fund is one option worth considering.
Andrew Robbens is a Client Portfolio Manager on the JPM UK Equity Core fund. Read more >
1. Source: J.P. Morgan Asset Management as at 31 December 2017. Fund performance is based on NAV of the share class E (inc), timing adjusted in GBP with income (gross) reinvested including ongoing charges, excluding any entry and exit fees. From inception on 31 March 2009, 3 year rolling returns with monthly step. Provides indicative returns that account for the timing difference between pricing of the pooled fund and its benchmark. Past performance is not an indication of current and future results.
Investment Objective: The fund aims to provide capital growth and outperform the FTSE(TM) All Share Index over the long term by investing primarily in a portfolio of UK Companies.
Key risks: The value of equity and equity-linked securities may fluctuate in response to the performance of individual companies and general market conditions. The single market in which the Fund primarily invests, in this case the UK, may be subject to particular political and economic risks and, as a result, the Fund may be more volatile than more broadly diversified funds.