View from the top: Simon Crinage, JPMorgan

JPMorgan Asset Management runs 23 investment trusts in the UK with combined assets of £9.3 billion, making it the largest investment trust provider in the country by both number of mandates and assets under management.

The firm snatched this title from F&C in 2009 and Simon Crinage, head of investment trusts at JPM, is charged with ensuring that it stays that way.

As Crinage explains, investment trusts have long been part of the JPMorgan fabric. The heritage dates back to the 1880s, when the firm pioneered pooled investment in US railways through such trusts as Money Observer Rated Fund JPMorgan American, which is still going strong today.

In more recent times a number of acquisitions have helped to boost the firm's trust presence, including the merger between Chase Manhattan and JPMorgan in 2000.

POSITIVE GROWTH

This brought in a number of trusts previously managed by former UK investment bank Robert Fleming Holdings, which Chase acquired only six months previous to the merger with JPMorgan, and where Crinage began his career over 30 years ago.

Crinage insists that JPMorgan is still working harder than most other asset managers to bring more investment trusts to market.

Since 2010 the firm has launched four JPMorgan-badged trusts: Brazil, Global Emerging Markets Income, Global Convertibles Income and Senior Secured Loan, all of which have met with enthusiasm from investors.

Indeed, Crinage says that over the past two to three years he has seen strong growth in demand across JPMorgan's entire investment trust range.

Largely, he says, this is coming from discretionary fund managers, many of whom have taken over the management of client portfolios from independent financial advisers since the implementation of sweeping reforms to commission payments.

However, he says that the number of private investors buying through direct-to-consumer platforms has also increased, which he finds particularly encouraging.

'I invest in all 23 of our investment trusts and I wish there were more opportunities for private investors to do so, particularly through company pension schemes, for example. As they run closed-ended vehicles, trust managers can really take long-term views without lots of money moving in and out that may force them to make a decision, and that can really make a difference over 20 or 30 years,' says Crinage.

THE ADVANTAGE OF GEARING

Additionally, he highlights investment trusts' ability to gear - or borrow - as a long-term benefit to investors. Interestingly, gearing has come to be seen as a less positive trait of investment trusts since 2008, when a number suffered heavy losses due to over-leveraged balance sheets.

However, Crinage points to a number of studies, including that conducted by Winterflood Securites and Canaccord Genuity last October, which indicate that 'modest' gearing has been one of the factors behind trusts' outperformance against open-ended funds over most time periods.

Like many other fans of investment trusts, Crinage also cites independent boards as one of the key advantages of trusts over funds. 'Boards exert increasing pressure in terms of performance expectations and fees, which helps trusts to perform well, to trade well and to grow,' he says.

Dealing with the 'increasing pressure' that comes from investment company boards is one of Crinage's main responsibilities. He states that JPMorgan favours working closely with boards on issues ranging from member succession to discount policies, although he insists that neither he nor the firm can be too 'prescriptive', as he is loathe to interfere with boards' independence.

Crinage is also financially responsible for the group's trust operation, and says he is in constant communication with both boards and shareholders in order to ensure that both parties understand what a trust is doing and why.

As he explains, this is particularly important during periods of underperformance. 'There is no one more acutely aware of issues around performance than us when things aren't going well. The ultimate sanction is that a board can fire us; we haven't been fired yet, but we can't be complacent about it and we'll go out of our way to make sure it doesn't happen,' he says.

'The key is making sure that we're doing everything we can to help the board and the shareholders understand why a trust is performing the way it's performing - communication in both directions is vital.'

JPMORGAN BRAZIL

Currently a key area of concern for Crinage is the JPMorgan Brazil investment trust. Launched in April 2010, the trust made a promising 8 per cent share price return in its inaugural year, but it has since suffered a number of blows, from the market dip of 2011 to the general negative sentiment that now plagues the region.

In the three years to 24 April the trust's share price has fallen by 38 per cent while its net asset value has fallen by 32 per cent.

The Brazil trust notwithstanding, JPMorgan's strengths have long been in emerging markets - one of the reasons over 30 per cent of the firm's UK investment trust equity range is invested in the region.

According to Crinage, whether it be US railways in the nineteenth century or China and India in the early 1990s, JPMorgan has often been the first in with an investment trust. Current strong performers include Money Observer Rated Fund JPMorgan Emerging Markets and its much younger counterpart, Global Emerging Markets Income.

JPMORGAN EMERGING MARKETS

Launched in 1991, JPMorgan Emerging Markets is the third-oldest trust in the Association of Investment Companies (AIC) global emerging markets equities sector.

In the year to 24 April it is the best-performing trust among its peers, returning 21 per cent compared to just 6 per cent from the sector. It has also performed well over the longer term, delivering an impressive 269 per cent over 10 years.

Global Emerging Markets Income, or GEMI as Crinage prefers to call it, has had a less successful 12 months, returning a third quartile 8.2 per cent in the year to 24 April.

Over three years, however, it has returned just over 20 per cent, placing it in the top half of the sector over the period. In addition, its 4.2 per cent dividend yield has proved popular with investors, with the trust attracting close to £250 million in inflows since launch.

The success of JPM Emerging Markets is particularly gratifying for Crinage, who has invested in the vehicle for both of his children since their births, 22 and 21 years ago respectively.

The experience has left him convinced that emerging markets are one of the best long-term plays investors can make. '[JPMorgan Emerging Markets] has done so well, I wish I'd done more of it - I just look back and think, "why didn't I do that for my mortgage endowment?",' he says.

FUTURE PLANS

However, for Crinage the future of JPMorgan's investment trust business is in alternative strategies. Surprisingly, of the £1.2 trillion that JPMorgan manages worldwide, only £250 billion is invested in equities, yet before 2013 every UK trust the firm managed was an equity trust.

'JPMorgan has an enormous real assets group that has a presence throughout the US and yes, that's an area we [in the UK] would definitely like to move into - into property, infrastructure etc.

There's nothing immediately on the runway, but there's a lot of thinking going on around how we can bring that capability to the UK marketplace,' he says.

As hinted at earlier, he also maintains that investment trusts have a lot to offer in the pension marketplace.

As more pensioners look to their investment portfolios to provide income throughout their retirement, he believes that trusts, with their ability to build dividend reserves and pay out both income and capital, could play a crucial role - particularly if structured in a lower volatility, highly diversified multi-asset format.

Again, this is as yet a pipe-dream, but one that shows his own and JPMorgan's enthusiasm for the asset class and its potential. In the meantime bright ideas remain only a small part of the picture for Crinage.

He insists that the interests of current boards and shareholders come first: ' Clearly our business focus is around our existing client base; if we haven't got our existing clients, we haven't got a business.'

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