HEAD-TO-HEAD: First State versus JP Morgan AM

123456

INVESTMENT APPROACH

Both the First State and JP Morgan funds are Asia-focused mixed asset products that invest in both equities and fixed income, according to Ge.

However, there are several differences in how the two offerings are managed. For example, the First State fund has a targeted fixed 50:50 allocation to the underlying equity and fixed income sleeves, while the JP Morgan fund is more dynamic.

“Asset allocation is not expected to generate alpha for the First State strategy given these fixed targets.

“Conversely, the JP Morgan fund can dynamically adjust their equity and fixed income asset mix and uses asset allocation as an alpha driver,” Ge said.

Because of that, the First State strategy will generally have a lower allocation to equities compared with the JP Morgan fund, which has had equity exposure of around 55-60% in recent years, he said.

The underlying equity processes between the two funds are also different, according to Ge.

For the First State fund, it focuses on quality companies that deliver sustainable growth, while the JP Morgan fund focuses on above-market dividend-yielding companies. He added that the JP Morgan offering has a value tilt, investing in stable and low growth names.

On the fixed income side, the First State fund focuses on higher quality issuances and only has around 16% of its assets in high yield bonds as of the end of May, while the JP Morgan fund has 29% in high yield during the same period.

Equity sleeve – sector allocation (%)

Source: Morningstar Direct

Fixed income sleeve – credit quality allocation (%)

Source: Morningstar Direct

123456