JP Morgan Asset Management has confirmed it is soft closing a Luxembourg-domiciled fund within its $32bn emerging markets equities strategy that is run by Austin Forey and Leon Eidelman.
The $7.3bn JP Morgan Emerging Markets Equity fund closed on 11 May “following strong relative performance and steady interest from clients”, a spokesperson from the asset manager confirmed.
“To allow the fund to continue to meet its investment objectives and to protect the interests of existing investors, investments into the fund are temporarily restricted to existing investors only,” they added. “As part of our ongoing commitment to existing investors as a fiduciary, we are constantly monitoring capacity management best practices.”
Soft closure sensible in context of size of overall strategy
Square Mile research manager Amaya Assan noted the UK-domiciled JPM Emerging Markets fund, which has assets of £1.9bn, remained open. Assan said the soft closure made sense in context of the $32bn run across the overall strategy.
Morningstar manager research analyst Lena Tsymbaluk JPMAM has historically been disciplined in soft-closing the strategy when it approaches capacity, as they did in the 2011 and 2018.
“Capacity estimate currently stands at $32bn, reflecting improving liquidity in the market, especially China A-share liquidity,” Tsymbaluk said. “Given the strategy’s primary focus on larger-cap firms, and its liquidity profile, we believe the capacity estimate is reasonable. The investment process does not change as a result of this soft-closure, focusing on investing in high quality businesses that compound earnings sustainably over the long term.”
Closed-ended strategy could now pique investor interest
Investors are also able to access Forey via the £1.2bn JP Morgan Emerging Markets investment trust.
Winterflood Investment Trusts head of research Simon Elliott said investment trusts historically benefit from an increase in demand when equivalent open-ended funds soft close.
Elliott said the JP Morgan Emerging Markets investment trust is currently trading at an attractive discount of 12% compared to an 8% average over the last 12 months. “We suspect that this reflects general investor nervousness over equities at present and consequently believe that the fund offers value at the current discount level.”
Momentum Global Investment Management portfolio manager Andrew Hardy said the decision by JPMAM to soft close the fund looked “reasonable” but was probably a function of assets across the wider business rather than those just in the strategy.
Hardy said: “As of last year, JPMAM had over $100bn under management across their EM and Asia Pacific equity strategies, many of which would have overlapping holdings and so would compete for capacity with this fund.”
Despite the capacity problems that can create, Hardy said the large team had “navigated a challenging 10 years of so for EM investors well with the additional benefits of a stable and experienced management team and a consistently implemented philosophy and process”.
