JPMorgan UK Smaller Companies (JMI)

13/10/2021

Results analysis from Kepler Trust Intelligence

JPMorgan UK Smaller Companies (JMI), formerly JPMorgan Smaller Companies, has reported strong results for the year ending 31 July 2021. Outstanding returns from UK smaller companies has been accompanied by substantial outperformance.

Over the period the trust benefitted from positions in defensive names robust to the effects of the pandemic as well as buying into discounted cyclical names that suffered from the initial impact of the pandemic but would emerge stronger in the recovery as weaker competitors fell by the wayside.

Kepler view

The recently renamed JPMorgan UK Smaller Companies (JMI) has posted a year of excellent results. This has contributed to an outstanding long term track record of outperforming their benchmark and peers; the trust is ranked 3/14 within its peer group over the last five years for NAV total returns (as at 11/10/2021, source: JPMorgan Cazenove).

This success has been based on the experience of the long-standing managers Georgina Brittain and Katen Patel (tenures beginning in 1998 and 2014 respectively) following a well-established process combining a quantitative system balancing quality, valuation and momentum factors with bottom-up fundamental analysis. We note that balancing the portfolio between 'growth' (higher quality, premium) stocks and more cyclical, less expensive 'value' stocks has helped the portfolio to navigate the extreme style rotations that have occurred in the last year.

For an investor with a bullish outlook on UK smaller companies as an asset class, we think JMI is a way of gaining exposure that balances the potential for outperformance without making a binary stylistic bet on 'growth' versus 'value'. If the ongoing rally in UK smaller companies is led by cheaper, value stocks driven by broad economic recovery or if the nascent tech, growth orientated sectors begin to emerge as winners then JMI should benefit either way due to their balanced approach.

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