Half-year Report

RNS Number : 5523B

JPMorgan Multi-Asset Trust plc

08 October 2020

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN MULTI-ASSET TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED
31ST AUGUST 2020

Legal Entity Identifier:

549300C0UCY8X2QXW762 Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

Introduction

The Company's objective is to generate income and capital growth through a multi-asset strategy, while seeking to maintain lower levels of volatility than an institutional equity portfolio. Our commitment to this objective is underpinned by the Company's distribution policy, which aims to achieve a yield of 4.0% on the Initial Issue Price of £1.00 per share at the time of the Company's launch in 2018.

Portfolio Performance

During the half year to 31st August 2020, the Company recorded a negative total return of -4.9% on its opening net asset value, an underperformance of 7.3% over the Company's Reference Index in extremely volatile market conditions. The Company's Reference Index, comprising the LIBOR one-month sterling rate plus 4.5% per annum, is used instead of a benchmark, since it is considered more closely to reflect the profile of the Company's portfolio.

During this reporting period the Coronavirus (Covid-19) pandemic led to 'lockdown' in large parts of the global economy in an effort to limit the spread of the virus. This resulted in extreme market volatility with significant falls in share prices in March. In response to the threat of a global economic depression central banks injected an unprecedented level of economic stimulus into the world's economies. This massive government support helped to bolster investor confidence and resulted in an unexpected rally in equity markets during April. Equity markets have remained strong since although performance has been disparate with internet and technology growth stocks, most notably in the US, hitting record highs whilst value stocks have struggled to recover. The Board kept in regular contact with the JPM investment management team during the peaks of market turbulence in order to keep fully updated of developments. Further details of the portfolio are provided in the investment managers' report on page 9 of the Company's Half Year Report and Financial Statements.
 

Share Price Performance

The Company recorded a negative share price total return to shareholders of -6.2% during the half year to 31st August 2020. The price of the Company's shares has traded at a discount to net asset value throughout the period, with the discount widening slightly from 7.9% at the start of the period to 9.4% on 31st August 2020. The average discount during the period was 8.8%, with the shares trading between discounts of 1.4% and 20.4%. No shares were bought back in the period.

Revenue and Distributions

During the half year to 31st August 2020, the Company's net loss after taxation was £(4,387,000) (2019 net return after taxation: £5,143,000). In the period up to the signature of this half year report, the Board has declared two interim distributions, each of 1.0 pence per share, in respect of the Company's year ending 28th February 2021. The Company has not elected to 'stream' any part of these distributions and therefore both are designated wholly as dividend for tax purposes.

The Board of Directors

As this is my first Chairman's Statement I would like to thank the Board for deciding to appoint me as the Chairman of the Company's Board on the retirement of Sir Laurence Magnus. I very much look forward to continuing my predecessor's skilful leadership of the Company's Board.

As referred to in the Chairman's Statement of the Company's Annual Report and Financial Statements for year ended 29th February 2020, Richard Hills retired from the Company as a Director at the Company's Annual General Meeting on 2nd July 2020 and Sir Laurence Magnus retired as Chairman and a Director of the Company on 1st October 2020 and was succeeded by myself as Chairman.

In addition to the thanks offered in the previous Chairman's Statement to Richard Hills for his services as a Director, I and the Board also offer our thanks for the valuable service that Sir Laurence Magnus has provided to the Company as Director and Chairman and wish him well for the future.

Following the Board's announcement on 18th August 2020 of its decision to appoint Patrick Edwardson as a non-Executive Director, we are pleased to confirm that he joined the Board on 1st October 2020. Patrick Edwardson has extensive knowledge and experience of investment markets and multi-asset funds and had 27 years of investment experience as a fund manager with Baillie Gifford where he was a partner and Head of the Multi-Asset Team, before his recent retirement. He is an excellent addition to the Board at a time when the Company is building its track record as a consistent source of dividend yield.

It is the Board's intention to continue with a complement of four Directors.

Outlook

It is difficult, as at the time of writing, to predict the future direction of financial markets with any confidence. The scale and longevity of the unprecedented disruption to the global economy caused by the Covid-19 pandemic remains uncertain and very much depends upon the timing of the availability of a vaccine and the extent to which a 'second wave' of the spread of the virus leads to the reintroduction of widespread Government controls over the movement of people, goods and services. Underlying the current focus on Covid-19 remains the threat of escalating trade tensions between the United States and China and the uncertain outcome of the US Presidential elections in November 2020. Nevertheless the Board believes that the JPMorgan Investment Management team are well placed to navigate the current volatile markets and to achieve the objectives of generating income and capital growth which the Company set at launch.

Sarah MacAulay

Chairman     8th October 2020

INVESTMENT MANAGERS' REPORT

Introduction

In this report, we review the Company's investment performance for the six months ending 31st August 2020, a period dominated by the Covid-19 pandemic which triggered severe market volatility and global economic collapse. We examine how the Company's diversified portfolio has performed over this turbulent period and we consider the portfolio's positioning as we look ahead to the future.

Setting the scene - our investment approach

We seek to achieve the best risk-adjusted returns by investing in a globally diversified portfolio that includes company shares, bonds and other assets. Our aim is to construct an actively managed, balanced portfolio which is flexible with respect to asset class, geography and investment sector. This flexibility allows us to take advantage of the best opportunities to deliver sustainable income and capital growth to our investors. Our strategy also includes exposure to alternative assets such as infrastructure, which has the potential to offer an attractive source of income and diversification alongside the more traditional asset classes. We take a medium to long-term view of markets, acting on investment themes that we consider appropriate as we navigate the ever-changing macro environment.

Market review: pandemic triggers rapid economic shock to the global economy

The defining feature of the review period was the Covid-19 pandemic and the ensuing economic upheaval it precipitated. It was in March that we first witnessed the full impact of the virus, as the ramifications for the economic outlook and corporate earnings led to global equity markets spiralling downwards. The outbreak led to a massive global demand shock and the accompanying restrictions on activity were compounded by crude oil prices plunging by more than 50%, amid a breakdown in production discussions between OPEC and Russia. The knock-on effects saw March deliver one of the worst weeks for global equity markets since 2008's global financial crisis, and the sharpest falls in the S&P 500 index since Black Monday in 1987.

The US Federal Reserve stepped in to restore some normality to markets by providing as much liquidity as possible, acting as a 'buyer of last resort' by expanding its balance sheet and putting in place credit facilities. The traditional negative correlation between equities and government bonds broke down, as we saw the 10-year U.S. Treasury bond yield trade from a low of 0.31% to 1.02% within a week.

After the severe shock in March, markets rebounded strongly in April. Volatility declined from extreme levels and bond markets rallied as central banks committed to purchase more government and corporate bonds. Governments and central banks introduced very significant stimulus measures to reduce the damage caused by the economic shutdown, including fiscal aid, interest rate cuts and plans to inject more money into their economies, which calmed markets and restored some positive sentiment.

Multiple macroeconomic data points in May, including improving unemployment numbers and Purchasing Manager Index (PMI) figures, gave positive support to equities through June. The European Central Bank (ECB) surprised markets, increasing the size of their bond-buying recovery fund by a larger than expected €600 billion to €1.35 trillion.

US economic activity for the second quarter, as measured by Gross Domestic Product (GDP), fell by an annualised rate of 32.9% compared with the previous quarter. While this confirmed the largest decline in GDP since the Second World War, markets were more focused on the recovery in some of the economic data. In Europe, second-quarter GDP fell by 12.1% compared with the previous quarter - the largest quarterly decline in the Eurozone's history. In the UK, GDP contracted by 20.4% in the second quarter, the worst decline on record. However, UK retail sales grew 3.6% in July, driven by low fuel and clothing prices and data pointed to further recovery ahead.

Positive investor sentiment continued into August, with the S&P 500 scaling record highs as a large majority of companies surpassed market expectations for quarterly earnings. Emerging market equities lagged developed markets whilst credit markets lagged equities. In the Eurozone, economic sentiment measured by the Euro Area Economic Sentiment Indicator rose for a fourth straight month in August. At the time of writing, the resurgence of Covid-19 infections in many European countries to levels not seen since May triggered fresh quarantine requirements and localised lockdowns.

How has the Company performed over the six-month period under review?

The Company delivered a negative return on net assets of -4.9% over the period, lagging the Company's Reference Index which returned 2.4%.

The portfolio's developed market equity exposure was the largest negative contributor to performance, while emerging market equities provided a positive contribution over the period. Our underlying equity strategy suffered relative to the broader market given its quality bias. Our regional equity allocation decisions implemented via futures contracts also provided a negative contribution to returns, driven by our on average underweight position to the US relative to the broader market. Performance across fixed income markets was mixed; while we saw strong performance in investment grade credit and a positive contribution from our government bond allocation, our exposure to high yield bonds detracted.

Portfolio review

The period saw significant changes in portfolio positioning. We commented in the annual report that we held significant exposure to equity markets through the last financial year and entered the period with an allocation of 66% to equities. We significantly reduced this in March, cutting equity exposure by 15% before starting to increase this again in May, as volatility eased and markets started to bounce back from the lows. Given the significant moves in equity markets over the period, our asset allocation decisions in developed markets had a negative impact on performance.

Our bespoke equity portfolio continued to favour names with sustainable dividend yields trading at attractive valuations. By the end of August, the portfolio was overweight utilities, technology and insurance at the sector level. The team are underweight consumer staples, industrial cyclical and retail. Within utilities they continue to favour structural winners such as the Spanish electricity company, Iberdrola and the Italian electricity company, Enel. The team increased their overweight exposure to technology and decreased their overweight position in energy to neutral. At a regional level, they remain overweight Europe, although this has reduced over the period. They remain underweight the US and Japan. The team's focus remains on identifying attractive stocks within each sector, and in each region, to generate incremental excess returns over time; their process is currently pointing towards above-average levels of these stock opportunities in the marketplace.

While stock selection is undertaken by our in-house International Equity Group, we tilt regional positioning to reflect our latest views. We implement this via the use of index futures. This approach enables us to maintain positions in high conviction, dividend-paying stocks whilst adjusting regional exposure to reflect our favoured markets. Over the period, we significantly reduced our exposure to the US before adding back to this in June when we also increased our exposure to continental Europe and reduced our UK equity exposure. We continued to hold emerging market exposure through the period with an allocation of 10% on average and an increase to 12% by the end of August.

In the Company's portfolio of fixed income investments, we significantly increased our exposure to government bonds in March before scaling this back from April and today have very little exposure to the asset class. In contrast, we introduced an allocation to investment grade corporate bonds in March following the announcement of support from the US Federal Reserve and added to it during the quarter before scaling back from June as we invested more in equity markets. While we halved our global high yield bond exposure in March, we increased this from April to reach 15% by the end of August given the backdrop of support from the Fed. We also added exposure to emerging market debt in June as a weaker US dollar gave support to the asset class.

Outlook: weathering the economic uncertainty

We retain a tilt toward risk assets in the portfolio, through both equity and credit markets. We believe the economic recovery is gaining pace, as macroeconomic data improves and business and consumer confidence strengthens. The unprecedented level of monetary and fiscal stimulus will continue to fuel a pickup in global growth which we expect to continue over the next 12 months. However, we are mindful of the looming event risks including uncertainty about the U.S. election and geopolitical risks surrounding Brexit. We expect volatility to persist in markets until the U.S. presidential election is over. The path of the virus is also central to our base case, given the recent increase in cases has prompted reversals in efforts to reopen economies. We don't anticipate a repeat of the large-scale lockdowns that occurred in the second quarter but some disruption is inevitable. The portfolio remains well diversified and we will pursue market opportunities across asset classes and regions as they present themselves.

Katy Thorneycroft

Gareth Witcomb

Investment Managers     8th October 2020

INTERIM MANAGEMENT REPORT

The Company is required to make the following disclosures in its Half Year Report:

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into five broad categories: investment and strategy; accounting, legal and regulatory; corporate governance and shareholder relations; operational; and financial, including the risk of global pandemics. Information on each of these areas is given in the Company's Strategic Report within the Annual Report and Financial Statements for the period ended 29th February 2020.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the period.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, and the economic and operational impact of Covid-19 that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties relating to the Company that would prevent its ability to continue in operational existence for at least 12 months from the date of the approval of this interim financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)  the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS104 'Interim Financial Reporting' and gives a true and fair view of the assets, liabilities, financial position and net return of the Company as required by the UK Listing Authority Disclosure and Transparency Rules ('DTR') 4.2.4R; and

(ii)  the interim management report includes a fair review of the information required by DTR 4.2.7R and 4.2.8R.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

•   make judgements and accounting estimates that are reasonable and prudent;

•   state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•   prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Sarah MacAulay

Chairman     8th October 2020

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31ST AUGUST 2020

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Period ended			Period ended
	31st August 2020			31st August 2019			29th February 2020
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments
held at fair value through
profit or loss	-	(6,942)	(6,942)	-	9,150	9,150	-	3,943	3,943
Net foreign currency
gains/(losses)	-	588	588	-	(5,832)	(5,832)	-	(2,608)	(2,608)
Income from investments	2,026	-	2,026	2,416	-	2,416	4,506	-	4,506
Interest receivable and similar
income	395	-	395	87	-	87	30	-	30
Gross return/(loss)	2,421	(6,354)	(3,933)	2,503	3,318	5,821	4,536	1,335	5,871
Management fee	(81)	(151)	(232)	(91)	(167)	(258)	(184)	(341)	(525)
Other administrative expenses	(192)	-	(192)	(155)	-	(155)	(393)	-	(393)
Net return/(loss) before
finance costs and taxation	2,148	(6,505)	(4,357)	2,257	3,151	5,408	3,959	994	4,953
Finance costs	(7)	(14)	(21)	-	(1)	(1)	(2)	(3)	(5)
Net return/(loss) before
taxation	2,141	(6,519)	(4,378)	2,257	3,150	5,407	3,957	991	4,948
Taxation (charge)/credit	(42)	33	(9)	(313)	49	(264)	(457)	102	(355)
Net return/(loss) after
taxation	2,099	(6,486)	(4,387)	1,944	3,199	5,143	3,500	1,093	4,593
Return/(loss) per share (note 3)	2.44p	(7.53)p	(5.09)p	2.26p	3.71p	5.97p	4.06p	1.27p	5.33p

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31ST AUGUST 2020

	Called up
	share	Special	Capital	Revenue
	capital	reserve1	reserves1	reserve1	Total
	£'000	£'000	£'000	£'000	£'000
Six months ended 31st August 2020 (Unaudited)
At 29th February 2020	931	84,768	2,143	549	88,391
Net (loss)/return	-	-	(6,486)	2,099	(4,387)
Distributions paid in the period (note 4)	-	-	-	(1,722)	(1,722)
At 31st August 2020	931	84,768	(4,343)	926	82,282
Six months ended 31st August 2019 (Unaudited)
At 28th February 2019	931	84,925	1,050	495	87,401
Repurchase of shares into Treasury	-	(157)	-	-	(157)
Net return	-	-	3,199	1,944	5,143
Distributions paid in the period (note 4)	-	-	-	(1,724)	(1,724)
At 31st August 2019	931	84,768	4,249	715	90,663
Year ended 29th February 2020 (Audited)
At 28th February 2019	931	84,925	1,050	495	87,401
Repurchase of shares into Treasury	-	(157)	-	-	(157)
Net return	-	-	1,093	3,500	4,593
Distributions paid in the year (note 4)	-	-	-	(3,446)	(3,446)
At 29th February 2020	931	84,768	2,143	549	88,391

1  These reserves form the distributable reserve of the Company and may be used to fund distributions to investors.

STATEMENT OF FINANCIAL POSITION

AT 31ST AUGUST 2020

	(Unaudited)	(Unaudited)	(Audited)
	31st August 2020	31st August 2019	29th February 2020
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	74,487	84,281	85,625
Current assets
Derivative financial assets	4,847	689	3,064
Debtors	395	472	466
Cash and short term deposits	3,528	5,861	3,876
	8,770	7,022	7,406
Current liabilities
Creditors: amounts falling due within one year	(112)	(538)	(134)
Derivative financial liabilities	(863)	(102)	(4,506)
Net current assets	7,795	6,382	2,766
Total assets less current liabilities	82,282	90,663	88,391
Net assets	82,282	90,663	88,391
Capital and reserves
Called up share capital	931	931	931
Special reserve	84,768	84,768	84,768
Capital reserves	(4,343)	4,249	2,143
Revenue reserve	926	715	549
Total shareholders' funds	82,282	90,663	88,391
Net asset value per share	95.6p	105.3p	102.7p

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31ST AUGUST 2020

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st August 2020	31st August 2019	29th February 2020
	£'000	£'000	£'000
Net cash outflow from operations before dividends and
interest	(275)	(501)	(758)
Dividends received	1,679	1,694	3,163
Interest received	280	488	1,049
Overseas tax recovered	4	3	14
Interest paid	(21)	(1)	(5)
Net cash inflow from operating activities	1,667	1,683	3,463
Purchases of investments	(42,439)	(29,836)	(56,065)
Sales of investments	48,900	38,471	58,284
Settlement of forward foreign currency contracts	(3,298)	(4,601)	716
Settlement of future contracts	(2,814)	(1,252)	(2,140)
Purchases of derivatives	(612)	-	(74)
Net cash (outflow)/inflow from investing activities	(263)	2,782	721
Repurchase of shares into Treasury	-	(342)	(342)
Distributions paid	(1,722)	(1,724)	(3,446)
Net cash outflow from financing activities	(1,722)	(2,066)	(3,788)
(Decrease)/increase in cash and cash equivalents	(318)	2,399	396
Cash and cash equivalents at start of period	3,876	3,463	3,463
Exchange movements	(30)	(1)	17
Cash and cash equivalents at end of period	3,528	5,861	3,876
(Decrease)/increase in cash and cash equivalents	(318)	2,399	396
Cash and cash equivalents consist of:
Cash and short term deposits	2,365	1,963	3,164
Cash held in JPMorgan Sterling Liquidity Fund	1,163	3,898	712
Total	3,528	5,861	3,876

NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31ST AUGUST 2020

1.  Financial statements

The information contained within the financial statements for this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 29th February 2020 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and including the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.  Accounting policies

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in October 2019.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 31st August 2020.

All of the Company's operations are of a continuing nature.

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 29th February 2020.

3.   Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st August 2020	31st August 2019	29th February 2020
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	2,099	1,944	3,500
Capital (loss)/return	(6,486)	3,199	1,093
Total (loss)/return	(4,387)	5,143	4,593
Weighted average number of shares in issue	86,096,408	86,138,011	86,117,323
Revenue return per share	2.44p	2.26p	4.06p
Capital (loss)/return per share	(7.53)p	3.71p	1.27p
Total (loss)/return per share	(5.09)p	5.97p	5.33p

4.  Distributions paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st August 2020	31st August 2019	29th February 2020
	£'000	£'000	£'000
2021 first interim distribution paid of 1.0p (2020: 1.0p)	861	863	863
2020 second interim distribution paid of 1.0p	n/a	861	861
2020 third interim distribution paid of 1.0p	n/a	n/a	861
2020 fourth interim distribution of 1.0p (2019: 1.0p)	861	n/a	861
Total distribution paid in the period	1,722	1,724	3,446

All distributions paid and declared in the period/year are and will be funded from the revenue, capital and special reserves.

A second interim distribution of 1.0p per share, amounting to £861,000 has been declared payable on 24th September 2020 in respect of the year ending 28th February 2021.

5.  Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st August 2020	31st August 2019	29th February 2020
Net assets (£'000)	82,282	90,663	88,391
Number of shares in issue	86,096,408	86,096,408	86,096,408
Net asset value per share	95.6p	105.3p	102.7p

JPMORGAN FUNDS LIMITED

8th October 2020

For further information, please contact:

Paul Winship

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

END

A copy of the half year report will shortly be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism 

The half year report will also shortly be available on the Company's website at www. www.jpmmultiassettrust.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

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