The primary objective of JP Morgan Global Core Real Assets investment fund is to provide shareholders with a steady stream of income from interests in physical assets such as office buildings and ships that transport liquefied petroleum gas (LPG) around the world.
It is a role that the fund, valued at £153 million, has fulfilled satisfactorily since its launch in September 2019. Although quarterly earnings per share are small in absolute terms (1.05p), they are equivalent to annual dividend income. of 5.8 percent – in line with the trust’s income target of between four and six percent.
They are also on an upward trajectory, at a time when interest rates around the world appear to have peaked.
Later this month, the trust’s board will announce the final dividend payment for the financial year ending February 28. With 3.15p in dividends already declared, it would be a big surprise if annual income isn’t healthy above last year’s 4.05p.
Still, it’s not all good news for the trust’s investors. Over the past year the trust’s share price has been sliding – and although it has made a steady recovery since November, it stands at 72p, compared to 89p a year earlier.
In the fund’s defense, most investment trusts have share prices that do not reflect the value of their underlying assets – reflecting some of the widespread global dissatisfaction with equities.
The JP Morgan fund’s shares are less favored than most other funds, with a 23 percent discount to the value of the trust’s assets. The trust’s share buybacks – a move designed to boost their price by limiting supply – have had little impact on reducing the discount.
Philip Waller, portfolio manager, remains unfazed by the stock’s performance and believes confidence can play a key role in an investor’s arsenal. “It is ideal as a cornerstone, as a core interest in a portfolio,” he says.
Waller’s argument is that the trust offers investors something different than regular income categories such as stocks and bonds. The fund seeks income from a variety of sources, providing both asset and geographic diversification. Further layers of diversification are provided by exposure to listed and private assets – and funds that hold some real assets.
The three main sources of income are investments in real estate (industry, offices, homes and shops), infrastructure (energy) and transport (airplanes, trains and ships).
For example, the trust owns a fleet of ships that transport LPG from North America and the Middle East to Britain and Europe. The ships are leased to energy companies, with income from the leases forming part of the dividends received by the trust’s shareholders. It also owns container ships and maintenance boats for wind farms. About 96 percent of the assets it leases are currently in use.
JP Morgan is a serious player in the alternative assets sector, managing £167 billion globally. The fund is listed on the London Stock Exchange and has a market ticker of JARA and an ID code of BJVKW8. The ongoing trust fee is 1.29 percent and the shares can be purchased through most investment platforms. While Waller says the trust is popular with asset managers, investors should only buy if they want to diversify their income sources.
Capital growth is not the trust’s main priority. Over the past year, shareholders have suffered a total of 14.3 percent in paper losses, with the income portion offsetting the decline in the share price.