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JPMorgan convertibles trust throws in the towel

12 July 2019

Board of JPMorgan Global Convertibles considers liquidation and returning cash to shareholders after being told shareholders were unlikely to support a continuation vote in November.

JPMorgan Global Convertibles Income (JGCI) is considering liquidating the company and returning cash to shareholders after being told it was unlikely to pass a continuation vote in November.

In a statement to the stock exchange the £101 million investment trust said, ‘having received feedback from a significant proportion of the company’s shareholders the board is not confident that there will be sufficient support for continuation’.

As a result, the trust’s triennial continuation vote has been scrapped and instead the board, which is chaired by Simon Miller, will put forward proposals for an orderly wind-up. This may include an option for shareholders to roll over some or all of their investment.

Launched six years ago, JGCI was well supported by fund and wealth managers such as Premier Asset Management and Brewin Dolphin. However, it failed to perform well against rival debt funds from its investments in convertibles, which are bonds that can convert into shares at set times and price points.

Over five years, it delivered a total return on net assets of just 14% compared to the 30% to 41% of other high yielding, listed debt funds. Unlike its rivals, which traded on premiums above net asset value, JGCI shares trailed on a 7% discount below NAV with shareholders receiving a five-year total return of just 2.5%.

A zero discount control policy brought in two years failed to rerate the stock and simply shrank the fund's assets as the board bought back around 40% of the shares.

On top of poor performance, the trust also suffered from turnover in fund managers in the past 18 months with Natalia Bucci leaving the team in May, having taken over from Antony Vallee, its first manager, in February last year. It is currently managed by Hart Woodson and Paul Levene.

The board’s decision is a setback for fund manager JP Morgan Asset Management although it remains a powerhouse in investment trusts with 22 other stock market funds in its stable.

There are signs that investment trust boards may be becoming more proactive in bowing to shareholders' commands, jumping before they are pushed.

Last month Martin Currie Asia Unconstrained (MCP) announced it would liquidate and roll into another Martin Currie open-ended fund, followed by El Oro (ETX) last week making similar proposals.

Establishment (ET), a small, Asia-focused global trust, last November announced it would seek liquidation as members of the Thornton family, who owned over a third of the shares, wanted to get their money out at closer to asset value or invest elsewhere.

This week it announced that half of its shareholders had opted to take cash with the remainder rolling into Henderson International Income (HINT) and VT Garraway Asian Centric Global Growth, a new fund which Establishment's manager Henry Thornton will help run.

Investment company news brought to you by Citywire Financial Publishers Limited.

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