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Mixed fortunes for the two JPMorgan European pools

JETG / JETI : Mixed fortunes for the two JPMorgan European pools

JPMorgan European Investment trust interim results announcement covering the six months that finished on 30 September 2014 has been published.

For the growth portfolio (JETG) there was a negative return on net assets of 4.5% – an underperformance of its benchmark, the MSCI Europe ex UK Index, of -2.9%. the rating did not change and so the return to shareholders was also -4.5%. the interim dividend was maintained at 5.45p.

The income portfolio (JETI) outperformed, producing a negative return on net assets of 1.8%. The return to its shareholders was -2.0%. It is switching to paying quarterly dividends – these are running at 1.1p a quarter – below the level of last year’s interim of 3.25p (which covered a whole six month period).

The Board has decided to restrict the ability to switch between the two portfolios to just once a year – in March. Shareholders will have to vote on this. The rationale is that it will avoid any complication around the dividend payments if there was a large conversion.

For the growth class the biggest negative contributor was their holding in JPMorgan European Smaller Companies Trust where short term underperformance was compounded by a widening in the discount to asset value, although in its defence, this had been the most significant positive contributor to returns in the previous period. Other holdings which hurt performance included the fund’s position in Daimler which fell, along with the rest of the auto sector, as concerns intensified about slower economic growth, and Azimut, the Italian asset gatherer suffered as markets retreated. Being underweight Bayer, on valuation grounds hurt performance but this was more than offset by other holdings in the healthcare sector, most notably Merck and Novartis which they say added approximately 50bps of performance during the period under review.

For the income class, positions in salmon farming stocks such as Salmar, Marine Harvest and Leroy were beneficial. These experienced rising earnings estimates as demand continued to increase, despite the Russian import ban, and supply remained tight. They stayed underweight the banking sector throughout the six months under review, avoiding one of the biggest casualties in the sector, Banca Monte Dei Paschi Di Siena which halved in value. They say they continue to believe that the combination of litigation and regulation will hold back shareholder returns for the investment banks and not owning UBS or Deutsche Bank added to performance. However not holding BBVA and Santander was unhelpful. The managers do not believe the two bank’s dividend payments are sustainable.

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