JPMorgan Raises British Pounds – Analyst Blog

JPMorgan Asset Management, a business segment of JPMorgan Chase & Co. (JPM), has planned to raise up to £200 million from the emerging markets by forming its first investment trust, according to the Financial Times. The JPMorgan fund will have a 4% initial yield, and UK income growth trusts are yielding 4% to 5%.

 

The UK investors earlier used to invest only in the UK-based equity income funds. However, the fund managers faced difficulty in diversifying their portfolios within the country, as the loss of high-yielding bank stocks had a negative impact on dividends in 2009. Consequently, the market became concentrated with players distributing strong dividend, which led to over-exposure to a few stocks coaxing fund managers to switch their dividend focus overseas.

 

Besides, overseas investment will add diversification to the clients’ portfolios through a fund, by investing in the best emerging markets. Hence, JPMorgan stands to benefit from this proposition since it can help the company in expanding its operations in the unexplored markets as well.

 

However, there are other investment trusts that get their income exclusively from Asia, as well as a few open-ended Asian income funds. These trusts raise the competition risk for the JPMorgan fund in the long run.

 

Overall, the shift to overseas funds is based on commercial and fundamental reasons. Emerging markets are growing and are a potential footprint for private investors. Investment in the emerging markets will reap profit with improving standards of corporate governance and less-indebted economies. Therefore, investing in the trust will add to JPMorgan’s long-term capital growth.