HEAD-TO-HEAD: GAM vs JP Morgan

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Both the GAM and JP Morgan funds invest in Asia-Pacific including Japan, but the main difference is the markets they invest in. GAM is more focused on developed markets, while JP Morgan has a mix of both developed and emerging markets.

The difference lies in their benchmarks: GAM’s benchmark index, the MSCI Pacific Index, captures only five developed markets in the region, according to Ng. JP Morgan’s benchmark index, the MSCI AC Asia-Pacific Index, includes five developed market and nine emerging market countries in Asia-Pacific.

Fund vs benchmark index (top five country allocations)

Source: MSCI, GAM, JP Morgan Asset Management

Ng noted that the GAM fund has an unconstrained strategy and does not need to follow the benchmark. However, its portfolio somewhat resembles the MSCI Pacific Index on a country level.

“When I look back to its portfolio history, I think the country allocation has been similar to that of the benchmark that they use,” Ng said.

Not only do their benchmarks differ in country allocations, but in sectors as well.

On the benchmark level, one of the key differences is the allocation to information technology: the MSCI Pacific only has around 8% in the sector, while the MSCI AC Asia Pacific Index has 20% in IT.

It is not surprising then that the JP Morgan fund has 25% in IT, Ng said.

Fund vs benchmark index (top five sector allocations)

Source: MSCI, GAM, JP Morgan Asset Management

Although both funds look for growth opportunities in the region, the GAM fund prefers equities with lower valuations than the JP Morgan fund, Ng said, adding that the GAM product has a lower price-per-earnings multiple.

In comparison, the JP Morgan fund is more growth-oriented and the managers are willing to pay for companies with higher valuations provided they show long-term sustainable growth prospects, he added.

Differences in strategy

Both funds use different investment strategies.

For the GAM fund, managers Michael Lai and Ben Williams employ a top-down and bottom-up approach, according to Ng. The top-down approach is mainly a decision about the fund’s allocation to Japan, depending on macroeconomic factors. After that, they use a bottom-up approach to pick the stocks in Japan and the rest of the APAC markets based on various fundamentals.

For the JP Morgan fund, the fund managers, Aisa Ogoshi, Mark Davids and Robert Lloyd, identify “core franchise” and “quality growth” stocks, according to Ng.

Core franchise stocks refer to companies that have financial strength and strong corporate governance attributes.. Quality growth stocks are those that have long-term growth prospects.

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