The Lemon Fool

I've been surprised by the relative lack of coverage on the financial websites of this new trust launch by JP Morgan. Hoping this is helpful to some I am sharing my key points:

Minimum of £1000 multiples of £100. Issue price 100p
Platforms offering additional 0.5% in shares at IPO
Global portfolio with only estimated 5% in UK (Infrastructure)
Will invest via JP Morgan Global alternatives group managing $145bn
Investments will be private assets across core global infrastructure, core real estate (US and Asia Pacific) and core global transportation sectors, which together will make up c. 80% of the portfolio. The remainder will be invested in publicly listed real asset securities.
Will not hedge currencies so there will be currency risk particularly USDGBP
Objective is to create defensive reliable income stream with low correlation to equities across the cycle
Target asset allocation would have yielded 5% income last year, target in first year is 2% to 3% aiming at 4% to 6% dividends when fully invested out of a long-term target NAV total return of 7% to 9% (net of fees)
The expectation is for the trust to be 80% invested within six months and 100%
invested in six to twelve months due to investor queues
No trust gearing but 30% or so across the expected underlying portfolio once fully invested
OCF likely to be 1.2% to 1.3%
Discount control via option to buy back up to 14.99% of the trust's shares.

I am a mid 50's private investor managing ISA and SIPP portfolios for wife and I, principally for retirement and I have applied for the IPO via HL. I have no connection with JP Morgan and obviously strongly recommend anyone interested to do their own research.

https://am.jpmorgan.com/gb/en/asset-management/gim/per/products/jara-ipo

It appears that it will be a "fund of funds".

From the prospectus

Investment policy
The Company will pursue its investment objective through diversified investment in private funds or managed accounts managed or advised by entities within J.P. Morgan Asset Management (together referred to as“JPMAM”), the asset management business of JPMorgan Chase & Co.These JPMAM Products will comprise “Private Funds”, being private collective investment vehicles, and“Managed Accounts”, which will typically take the form of a custody account the assets in which are managed by a discretionary manager

The suspicion of the "fund of funds" concept is the scope that it may give for double charging and for that matter being a buyer of last resort for the underlying holdings. It's a Guernsey based Company as well.

Alaric wrote:It appears that it will be a "fund of funds".

From the prospectus

The suspicion of the "fund of funds" concept is the scope that it may give for double charging and for that matter being a buyer of last resort for the underlying holdings. It's a Guernsey based Company as well.

Very good point. The underlying fund charges are though included in the estimated OCF% I quoted and seem comparable to UK Infrastructure funds.

In my understanding it is giving retail investors access to underlying assets normally the preserve of institutions but you are right it will be spread across a few JPM investment vehicles rather than buying other trusts available to the public.

I am buying in as I am light infrastructure, wanted to top up global non-UK and add other real less correlated asset types.

By the way, there is an existing multi-asset IT known as JP Morgan Multi-Asset trust (MATE). It's holdings include: infrastructure, global equities, fixed interest, Government and high yield bonds, EM debt, and currencies.

https://www.hl.co.uk/shares/shares-sear ... ary-shares

richfool wrote:By the way, there is an existing multi-asset IT known as JP Morgan Multi-Asset trust (MATE). It's holdings include: infrastructure, global equities, fixed interest, Government and high yield bonds, EM debt, and currencies.

Thanks richfool for the tip.

I have 4.5% of my portfolio in MATE in my defensive category, together with SIGT but I read JARA as being somewhat different. But then I did say I have 51 trusts so going to have some overlap. Quick recheck looks like MATE has 12.99% infrastructure but no global transport or global real estate. I have no transport and only UK property other than European in TRY.

Where MATE has a discount of 10.9% JARA effectively launches at a 1.45% premium.

Silverstar64 wrote:
Where MATE has a discount of 10.9% JARA effectively launches at a 1.45% premium.

Looking at the Hargreaves graph of MATE share price, everyone who bought at the launch price has shown a capital loss ever since.

Alaric wrote:

Silverstar64 wrote:
Where MATE has a discount of 10.9% JARA effectively launches at a 1.45% premium.

Looking at the Hargreaves graph of MATE share price, everyone who bought at the launch price has shown a capital loss ever since.

Absolutely right and I am a little surprised. Obviously I'm taking a chance that I may regret not buying JARA in the market after trading starts. There is the commission and stamp duty saving but it's not much. Hopefully it'll be in demand.

I think MATE has limited appeal, it's <£100m and that's not all new money as it started with a rollover from another IT. It's a slow and steady, buy and forget trust. Reliably yields 4% plus, hopefully lower vitality.

MATE is interesting as its NAV has out performed both the share price and the reference index!

Maybe JARA will be buying a fair chunk of it and that will improve the SP...

gbjbaanb wrote:MATE is interesting as its NAV has out performed both the share price and the reference index!

Maybe JARA will be buying a fair chunk of it and that will improve the SP...

As the cycle nears its end I have SIGT and MATE in my top 5 and I'm quietly pleased with MATE. It occurred to me that the increasing discount could be some holders of the previous trust rolled into MATE sold their holdings dragging the price downward. I've topped up MATE recently and may again.

I can't though see JARA buying any MATE as it's a quite differentiated mandate with only infrastructure in common. I see them performing different roles for my portfolio, diversification (JARA) and defensive (MATE) both income producing.

I am confused as to the costs structure for this IT.

Charges as per Factsheet


Charges as per KIID


Does anyone have solid understanding as to the charges that are applied to this trust? Is it just me that has difficulty understanding what is being said?

EssDeeAitch wrote:
Does anyone have solid understanding as to the charges that are applied to this trust? Is it just me that has difficulty understanding what is being said?

They are running it as a fund of funds, so there are both the direct charges and those, including performance fees, of the underlying investments.

Governance would be of concern as the underlying funds are also part of the JP Morgan stable. How independent of the underlying funds are the JARA managers and directors.

Re the part that someone has circled in red, it is just pointing out what the charges are likely to work out at, based on the amount invested into the trust (initially taken up). I.e. a higher amount invested would cause the charges to represent a lower percentage than if a lower amount was invested.

From my understanding of the prospectus it is not a fund of funds in the normal sense of an IT holding other listed ITs rather it gives retail investors access to underlying Investments ordinarily only available to institutions. The OCF seems within the normal range for infrastructure funds. I believe with 95% invested outside the UK across a number of asset types this offers the prospect of both income diversification and lower correlation to equity markets that may need beneficial to some portfolios.

I read through the, JARA, prospectus last week and decided to avoid this one and bought Foreign & Colonial IT (FCIT) last Friday instead.
There was a small 5.5% discount to NAV and FCIT, a global IT, seems well core enough to me.

In my reading the JARA fees were beginning to mount up and also within the prospectus, from (my) memory, JPMorgan expected to be allocating shares at a 5% premium.

midgesgalore

midgesgalore wrote:In my reading the JARA fees were beginning to mount up and also within the prospectus, from (my) memory, JPMorgan expected to be allocating shares at a 5% premium.

The shares will open trade with a NAV of 98.5p and applying through HL (and presumably other platforms) you get an extra 0.5% share allocation so effectively 1% premium.

richfool wrote:By the way, there is an existing multi-asset IT known as JP Morgan Multi-Asset trust (MATE). It's holdings include: infrastructure, global equities, fixed interest, Government and high yield bonds, EM debt, and currencies.

https://www.hl.co.uk/shares/shares-sear ... ary-shares

I am sticking with MATE, with a yield of 4.16% and currently at a discount of: 8.0%

Though I will keep an eye on JARA and see how it settles down after the IPO.

Hi richfool,
I had a look over MATE but that isn't attractive to me either, their NAV is just a bit too low and the the buy / sell price difference just a bit too high - for me. The yield is nice though

midgesgalore wrote:Hi richfool,
I had a look over MATE but that isn't attractive to me either, their NAV is just a bit too low and the the buy / sell price difference just a bit too high - for me. The yield is nice though

Hi midgesgalore, (Re: MATE), I'm not quite sure what you mean by "their NAV is just a bit too low". The SP is at a discount to NAV, so the NAV is in fact higher than the share price. The SP is c 96.4p mid price and the NAV c 105p (depending on one's source). Or did you just mean you didn't like it because the NAV is below 100p.

I like it because of the discount to NAV, along with its yield and diversified multi-asset holdings.

https://citywire.co.uk/funds_insider/in ... undID=4050

https://www.hl.co.uk/shares/shares-sear ... ary-shares

richfool wrote:

midgesgalore wrote:Hi richfool,
I had a look over MATE but that isn't attractive to me either, their NAV is just a bit too low and the the buy / sell price difference just a bit too high - for me. The yield is nice though

Hi midgesgalore, (Re: MATE), I'm not quite sure what you mean by "their NAV is just a bit too low". The SP is at a discount to NAV, so the NAV is in fact higher than the share price. The SP is c 96.4p mid price and the NAV c 105p (depending on one's source). Or did you just mean you didn't like it because the NAV is below 100p.

I like it because of the discount to NAV, along with its yield and diversified multi-asset holdings.

https://citywire.co.uk/funds_insider/in ... undID=4050

https://www.hl.co.uk/shares/shares-sear ... ary-shares

Hi richfool
I am trying to be uber safe where I invest these days having lost my Carillion stake and sold out of SSE at a minor loss but ahead in total return.

What I meant was the NAV of the closed end fund, or its size according to the AIC website in the Capital Structure Tab, is about £91m plus or minus. For me I would like to see a bigger IT market cap. The fund life is to be reviewed again in 2023 at their AGM.
Those kind of funds that are continuously reviewed for continuation - presumably because of their size, worry me a bit.
I have no reason to believe this is a bad IT, but not one I want to pursue.

Best wishes, midgesgalore

Silverstar - a stock-market truism is to never, ever buy an IT at IPO.

Another is never to over diversify, so your holding of 51 trusts is frankly rather absurd.

I wish you well; but be aware your holding will be in a trust standing at a premium and with a year or more of lag as it invests its new capital; so dividends lower than running rate in the first year.

The shares will inevitably drift to a discount; though for sure JP Morgan will try to sustain par; though they didn't succeed with MATE...