HEAD-TO-HEAD: Blackrock vs JP Morgan AM

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Investment approach

Both the Blackrock and JP Morgan funds invest in global emerging market equities. However, there are huge differences between their investment strategy, according to Daniels.

While the Blackrock fund has a style-agnostic approach to investing, the JP Morgan fund is focused on investing in high quality growth stocks.

“The Blackrock fund’s lead manager, Gordon Fraser, is flexible. That means at any given time, he could be investing in growth or value stocks, depending on where he finds opportunities,” Daniels explained.

Fraser employs a combination of a top-down and bottom-up analysis, Daniels said, adding that Fraser developed a “macroeconomic dashboard”, which provides a country allocation framework for the strategy.

He prefers countries with high bond yields, weak currencies and strong economic activity. After deciding which countries to rotate into, he leverages on the team’s emerging market analysts for stock ideas.

For example, in 2018, the fund only had around 20% in China equities, as Fraser was concerned with tightening liquidity in the country, according to Daniels. However, the allocation to the asset class increased to at least 30% going into 2019 after Fraser noticed signs of improving liquidity and fiscal stimulus measures.

Daniels believes that a combined top-down and bottom-up approach to investing is difficult to employ. But he believes that Fraser has so far done well since he took over the fund in 2017.

However, Daniels doubted that the investing method could be reliably repeated.

“Fraser is really skilled in having the top-down and bottom-up correct, but the success of the approach is heavily reliant on his intuition and experience, which means that the process is not easy to replicate,” he said.

Turning to the JP Morgan fund, Daniels explained that the product is focused on high quality growth stocks.

For JP Morgan, quality stocks are those companies that have good balance sheets, good management teams, strong franchises and consistent positive earnings.

“The firm has always been focused on quality and growth and it has applied this approach to its other strategies,” he added.

The firm’s emerging markets equity fund classifies stocks into three buckets, which are “premium”, “quality” and “trading”.

Daniels explained that the fund prefers premium and quality stocks, which are names that operate in attractive industries with limited internal risks. The only difference between the two is that premium names are the “cream of the crop” and only account for 5% of the investment universe.

One example of a premium stock is Hong Kong-listed AIA, which is among the fund’s top 10 holdings. “That means that the fund manager has high conviction that AIA will be able to deliver,” he said.

Besides the investment approach, Daniels added that portfolio turnover is also different between the two funds.

Given that the Blackrock product takes advantage of macro opportunities, its turnover is higher, which is around 70%-100% annually. Meanwhile, the JP Morgan fund is more long-term, with a lower turnover of below 30%, according to Daniels.

The differences in their investment approach have resulted in differing sector and country allocations, as well as top 10 holdings, he added.

Sector breakdown (%)

Source: Morningstar. As of 30 November 2019

Country/region allocation (Top 5)

Source: Morningstar. As of 30 November 2019.

Top 10 holdings 

Source: Fund factsheets. As of 30 November 2019.

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