And the winner is...
Winner: JPMorgan Emerging Markets
Portfolio turnover at JPMorgan Emerging Markets Trust (JMG) was lower than ever last year at 6%, but this did not prevent JMG outperforming its benchmark index for the fifth year in succession and retaining its award.
Austin Forey has been manager since 1994, retains a number of holdings he initiated in the 1990s, and is justifiably proud that the trust’s net asset value total return increased roughly seven-fold over the 20 years to end 2019 compared to a four-fold increase in its benchmark.
Forey has honed back JMG’s portfolio to less than 60 of his highest-conviction ideas. He claims this does not increase its risk profile, because the largest holdings are all large and liquid, and the focus is on companies where “the drivers of return are all very different”. Not all holdings are in large companies, however, with around 17% in companies capitalised at less than £10 billion.
Forey lauds the research carried out by JPM’s 50-plus multilingual Asia-based analysts, “their ability to get into the weeds with companies” and “the diversification of insight and knowledge they bring”. He adds: “We want all kinds of ideas, so it is good to have a large team of people, with a common language and structure.” However, his focus is always on quality, and the trust’s country weightings are determined by where the team has identified the best-quality companies.
As a result, the trust is overweight in India but underweight in Korea, where there are very few quality companies in the team’s opinion. With China’s percentage of good companies rising steadily, its share of the portfolio has risen to around 33%, with all four of last year’s additions to the portfolio coming from China.
JMG’s portfolio is generally fully invested but ungeared, and Forey can be expected to sit tight with his longstanding holdings as the virus situation evolves. The trust focuses on capital growth and has a minimal yield. It has substantially outperformed its sister trust, JPMorgan Global Emerging Market Income, since the latter’s launch in 2010.
Managed by: Austin Forey since 1994
Sector: Global emerging markets
3-year NAV total return: 39.4%
3-year share price total return: 49.3%
Average sector discount: 8.8%
Ongoing charges: 1.02%
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Contrary to expectations in some quarters Templeton Emerging Markets Trust has not languished since its highly regarded manager Carlos Hardenberg resigned in early 2018. On the contrary, it has continued to achieve above-average returns under the joint management of Hardenberg’s erstwhile colleague Chetan Sehgal and more recently Andrew Ness.
Ness joined Franklin Templeton in September 2018, having worked for 24 years in financial services, latterly as a portfolio manager at Martin Currie. He and Sehgal are supported by Franklin’s Templeton’s large team of emerging market analysts and fund managers.
They have continued the policy adopted by the trust in late 2015 of holding a more diversified portfolio and of focusing on companies benefiting from the effects of rapidly developing technology and the growing power of the consumer in emerging markets. In line with the management group’s longstanding value bias, they look to buy at reasonable valuations.
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