J.P. Morgan Asset Management (JPMAM) hopes a change in investment process similar to the one it implemented in its America Equity SICAV in 2011 can re-invigorate investor appetite for its 138-year-old American Investment Trust (JAM).
Fiona Harris, investment specialist for US equities, explained to Investment Week that eight years ago JPMAM's flagship SICAV fund had a "very diversified", core equity-style portfolio but performance had struggled and, consequently, it was not attracting new investors: "People were [either] going to passive or higher-alpha potential", she said.
As a result, in August 2011, JPM America Equity saw its portfolio slimmed down to around 40 stocks and moved to a blend of value, run by Jonathan Simon, and growth, run by Timothy Parton. The decision paid off and the SICAV is five times larger today, at over $2bn.
JAM has faced similar problems; passive are an even bigger threat to active managers in the large-cap US equity space and there has been pedestrian performance from its large-cap portfolio, which accounts for 90% to 100% of net asset value (NAV).
The last time JAM traded on a premium to NAV was February 2015 and its board has bought back £240m worth of stock in the four and a half years since.
"The appetite from new investors was clearly low," Harris said.
"Most of the existing shareholders were okay with it, but, unfortunately, in our world okay [doesn't] last long."
In May, Garrett Fish announced he would stand down from managing JAM's large-cap portfolio. He was replaced with Simon and Parton, who will, again, cut the portfolio down to 20 to 40 stocks.
There was no change to the small-cap portfolio, which accounts for up to 10% of NAV and is run by Eytan Shapiro.
JAM has also completely removed the performance fee and switched to a tiered management fee structure of 0.35% on the first £500m of market cap, 0.30% on the next £500m and 0.25% above £1bn.
Harris said JPMAM was keen to see the trust, which it has run since 1881, "continue for the next ten, 20, 100 years".
"[It] is very, very important to us. It is a huge part of our legacy, our heritage," she added.
"To widen your shareholder base, you cannot just give them a compelling offering, you need to think about the fee structure as well.
"So, pricing and the removal of the performance fee, is coupled with the gearing and the alpha that we can get from the small-cap allocation.
"If Tim and Jonathan can weave their magic on the investment trust [as they did with the SICAV], I think we've got a very attractive product to attract and retain shareholders in the UK market."