JPMorgan Asian investment trust has scrapped its performance fee and has put the management team on final notice after a year of abject returns.
The £255.1m fund made 5.2 per cent in share price return over the year to 30 September, its annual report shows. The benchmark MSCI Asia ex Japan index made 8.1 per cent over the same period.
Company chairman James Long says the “disappointing” performance led the board to again review JP Morgan Asset Management as manager. While the firm has been kept on for 2015, its tenure will be put up for shareholder vote at the 2016 AGM.
The board also dispensed with the company’s performance fee, though the management charge remains at 60 basis points.
To control the trust’s discount, which ended September at 11.4 per cent, the board will buy back shares to keep the discount at least within the 8 to 10 per cent band. At 24 December the discount was 10.8 per cent.
JPM fund managers Ted Pulling, Sonia Yu and Jeff Roskell told investors the underperformance was due to picking the wrong stocks in Greater China and South Korea.
“In terms of the former, the portfolio’s large position in Macau casinos, which added value in 2013, detracted from performance in 2014,” they explain.
Numerous policies were enacted by China and Macau – many being part of the anti corruption campaign – that diminished gambling revenues and resulted in earnings forecasts coming under steady pressure.
“We reduced exposure to the sector, but in hindsight the positions should have been entirely sold earlier in the year. However at the time of writing, the company still holds Macau casino stocks, as valuation and cash flow profile within this sector remain attractive.”
That was accompanied by buying into cheap Korean industrials that fell even further after Chinese growth created a glut of the chemicals and steel they produce.
Meanwhile, positions in India have rewarded the fund handsomely, as have its large holdings in Chinese e-commerce.
“We continue to believe that our alpha generation will come via our bottom-up stock driven process and our unique country specialists’ approach to managing money in Asia,” the team adds.