HEAD-TO-HEAD: JP Morgan AM vs Schroders

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Investment approach

The JP Morgan and Schroder funds invest in Japanese equities. However, both are different in terms of their investment style.

The JP Morgan fund has a growth bias, while the Schroders fund prefers value stocks, according to Yew.

“The JP Morgan Fund is an all-out growth strategy,” Yew said. “What they are trying to do is pick the next Amazon and Google of the world or the next generation of market leaders within their respective sectors.”

The managers assign a forward-looking rating to companies from 1 (strong outperformance) to 5 (large underperformance) and the portfolio is predominantly invested in stocks rated 1 and 2, according to Yew. The portfolio has 50-90 names and a turnover of 38%.

Turning to the Schroders fund, Yew said that the fund’s manager looks at “deep value” opportunities. The fund also likes recovery turnaround plays, which are more event-driven type of opportunities, Yew added.

Holdings are broadly classified into three categories: stable growth companies with established franchises with pricing power and above-average growth rates; overlooked quality companies with strong profitability but ignored by sell-side analysts; and recovery or contrarian stocks or cyclical companies.

The fund has nearly 100 names and has a turnover of 14%.

Both of the funds’ styles have resulted in different sector allocations.

The JP Morgan Fund, for example, has more growth companies, such as information technology, while the Schroders fund has more allocation to materials, which are more cyclical, as well as financials, which have relatively low valuations compared to other sectors, according to Yew.

Sector allocation (%)

*Daiwa ETF Topix

Another difference that Yew highlighted was the allocation to small-cap stocks. Although both funds invest across different market caps, the Schroders fund has a significantly bigger allocation to Japan’s small cap companies.

Yew explained that the Schroders fund manager finds value in small- and micro-cap stocks, which have become a huge driver for performance of the fund.

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