HEAD-TO-HEAD: JPMorgan vs MFS

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Although both the JPMorgan and the MFS funds invest in European large-cap equities, the main difference lies in the stock selection process, which results in a significant variation of holdings.

The JPMorgan fund is a quant fund with a bias toward companies with short-term earnings momentum and selected stocks that tend to move in cycles, Meakin said.

He noted the quantitative model the investment team uses screens the European universe of stocks with the metrics of value, price, earnings momentum and quality.

The fund is driven mainly by the short-term upside of investments. Therefore, the JPMorgan product tends to have a higher turnover ratio of its holdings than the MFS fund.

Comparatively, the MFS fund holds quality stocks that are defined as companies with above-average sustainable growth and sound management.

“Some of the top ten holdings in the MFS fund, such as Nestle and Bayer, are notable for having these ‘quality’ aspects, rather than just near-term considerations like trends and earnings,” he added.

The MFS analyst team meets regularly with the competitors, customers and suppliers of their invested companies, according to Meakin. In order to generate a long-term earnings model, the team will also study sell-side research and industry consultant reports.

Moreover, portfolio construction is based on majority votes by the analyst team.

A look at the two portfolios shows that the JPMorgan fund has a stronger preference for cyclical stocks, including basic materials, consumer cyclical and financial services.

Across all sectors, the allocation in the MFS fund is closer to the average of its peers, according to Meakin.

Sector allocation

Data: Morningstar

Moreover, due to the different investment objectives, the top ten holdings of the two are distinctly different. The only common top holding, as of the end of February, was Swiss healthcare company Novartis.

Top ten holdings

Data: Morningstar, as of 28 Feb 2018

In terms of geography, both funds allocate the most to the UK.

The JPMorgan fund, as well as peer funds in the sector, are allocated mainly to large/mega caps. The MFS fund holds a more diversified allocation, from small-cap to mega cap companies.

Source: Morningstar

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