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Though it is not the oldest investment trust – an honour bestowed upon 150-year-old Foreign & Colonial – JPMorgan American has been making money for shareholders since 1881. Yet it has only done so through being willing to adapt and change with the times.
Some 137 years ago, the trust was launched with a mission to raise finance to build rail roads across the US. Known then as the Alabama, New Orleans, Texas and Pacific Junction Railways Company, it became The Sterling Trust at the end of the First World War with a remit to invest outside of the States.
It was in 1982 that the trust’s investment objectives were focused on North American equities.
JPMorgan American has been making money for shareholders since 1881
The fund’s evolution is not lost on investment manager Garrett Fish, who presides over the trust’s portfolio from offices in Midtown Manhattan. He believes the £1 billion fund will only survive if it ‘remains relevant’ to investors.
Certainly, under Fish’s watch – and that of an assertive boardroom led by Kevin Carter – the trust has continued to evolve. When he took over the investment helm in early 2002, Fish inherited a portfolio 25 per cent exposed to a mix of unquoted, micro and small companies.
Slowly but surely that holding has been whittled down to just five per cent with the trust’s main emphasis directed towards investing in companies which comprise the Standard and Poor’s 500 Index, the United States’ 500 largest listed companies.
The trust’s management fees have also been tickled down which means more money ends up in the pockets of investors. In October last year, they reduced from 0.52 per cent annually to 0.33 per cent on the trust’s first £1 billion of assets – with a lower fee of 0.25 per cent on any amount above that figure. Once other fees are added the annual total is 0.55 per cent.
Fish is also constantly fine-tuning the portfolio’s constituents, ensuring it remains underweight in sectors he believes are overvalued and over-represented in those where he feels valuations have further to go.
The result is a 61-strong large cap portfolio – accounting for 95 per cent of all assets – which is overweight in energy stocks, consumer staples companies and financials. Bank of America, Citigroup, petroleum refiner Valero and Walmart are all key holdings.
The trust’s smaller company exposure, comprising 116 positions, is managed by Fish’s colleague Eytan Shapiro ‘15 offices down the corridor’. Currently, this is being chipped away at because it looks less attractive – more risky – as an asset class, compared to the trust’s holdings in big blue-chip stocks.
While Fish is a fervent believer in the dynamics of the stock market – and holds little cash in the trust – he is long enough in the tooth to accept that at some stage there will be a correction.
Only two times previously has a bull market lasted longer or nearly as long as the current one – those ending in the great Wall Street crash of 1929 and the bursting of the tech-stock boom in March 2000. ‘I have no idea what the trigger will be,’ he says. ‘It could be an unexpected hike in inflation, a rise in interest rates, a spike in wages growth – or international trade wars. If you go by previous corrections, it could result in equities falling peak to trough by some 14 per cent.’
Despite this negativity, Fish says his modus operandi will not change. True to the spirit of the trust’s long history, he will continue to ‘look for the most attractive investment opportunities’. He predicts: ‘The United States will remain a fertile ground for growth companies.’