JPMorgan Japan Small Cap Growth & Income will be merged into the JPMorgan Japanese Investment Trust, boosting the portfolio’s assets under management (AUM) to £1bn.
The two trusts have made negative returns in recent years despite a roaring rally in Japanese equities. JPM Japanese – which will continue to be managed by Nicholas Weindling and Miyako Urabe after the merger – was down 10.6% over the past three years while the TOPIX benchmark index pounced 19.1%.
JPMorgan Japan Small Cap Growth & Income’s performance was even more stark, dropping 28.5% over the period while the market rallied.
Alexa Henderson, chair of the JPMorgan Japan Small Cap trust, said the board had “considered a number of possible alternatives” to solve this negative performance and ensuing 13.3% discount before settling on the decision.
She noted that the merger – which will be completed by October this year – would make its fees more attractive to investors, with its current charge of 1.02% dropping in line with JPM Japanese’s 0.61% fee.
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Other than these “significantly lower costs for shareholders,” Henderson hopes that the enlarged size of the FTSE 250 trust would also bring benefits.
The announcement said combining the two into a larger vehicle would result in “increased secondary market liquidity, a larger marketing presence, and a greater relevance to larger investors as a direct consequence of size”.
Andrew Courtney, investment analyst at QuotedData, said the merger should go ahead with some ease given the similarities in approach and provide benefits for shareholders of both trusts.
“From a practical perspective it appears that little will change for JFJ investors outside of the usual scale and management fee benefits, with JPMorgan also covering the transaction costs of the deal,” he said. “JSGI investors will benefit from an economic uplift given the divergence in discounts, and will benefit from the solid trajectory of the JFJ trust.”
