HEAD-TO-HEAD: JP Morgan AM versus Schroders

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The three-year cumulative performance of the JP Morgan and Schroders funds versus the benchmark indices. Source: FE Fundinfo. In US dollars.

PERFORMANCE

Share expects the JP Morgan fund to outperform when the market favours value stocks, given its historical value tilt and focus on generating income.

“It was not entirely surprising that the fund underperformed over the past few years given the growth environment,” she said.

However, she noted that the fund has also suffered from specific stock selection issues. For example, it had an outsized bet in “long-time underperformer” Kepco, which the team eventually sold in March this year.

That said, the fund’s new investment approach may help the fund’s performance moving forward, according to Share.

“With the newly introduced quality-at-a-reasonable-growth yield bucket, we expect the fund to be able to participate more in growth-led markets going forward, although it will continue to miss out on the high-flying but below-benchmark yielding stocks, such as Tencent and Alibaba,” she said.

Discreet annual calendar performance (%)

Source: FE Fundinfo. In US dollars.

Turning to the Schroders fund, Share believes that its investment approach has made its performance more consistent, regardless of any market environment.

“The Schroders fund’s investment framework of dividend cows, dividend growth and dividend surprises allows it to be nimbler in capturing capital appreciation opportunities and achieve a more consistent return profile,” she said.

“Nonetheless, similar to the JP Morgan fund, the Schroders portfolio manager also avoids the low dividend paying stocks with no clear catalyst for a payout increment, and he did not own Tencent or Alibaba in his latest portfolio.”

In terms of volatility, Share expects the JP Morgan fund to be more volatile.

“The JP Morgan fund has had some risk management and sell discipline issues in the past, which has contributed it to be more volatile. The portfolio managers are looking to size risky bets more conservatively going forward, but we need more time to see whether this initiative will be effective in improving risk-adjusted returns.

“On the other hand, the Schroders fund’s focus on management quality has made it less volatile and more downside resilient than the JP Morgan fund, and we expect this to continue.”

Three-year annualized volatility

Source: FE Fundinfo. In US dollars.

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