[UPLIFTING MUSIC]
So my name is Jonathan Simon.
I'm one of the two principal portfolio
managers of the JP Morgan American Investment Trust.
I have spent the bulk of my career--
actually, more than 30 years-- being
based in New York with JP Morgan Asset
Management as an equity portfolio manager.
Interestingly, my co-PM, whose name is Tim Parton,
has a fairly similar profile.
He moved to New York, I think, in the early 1990s,
so just over 30 years ago.
And he's also been a specialist in US equities from that date.
So we have a lot of similarities,
and we are co-portfolio managers of the JP Morgan American
Investment Trust.
Well, the question of often comes up as,
why invest in the United States?
And in the first answer is clearly
that it is the largest equity market in the world.
In fact, it makes up some 60% of all global equity markets.
But not only that, it also offers
diversification across pretty much every industry.
We always think about technology and the leading companies
and the innovation that comes out of the United States,
but also, you have financial services and health care,
industrial manufacturing-- pretty
much every sector of the global economy
is covered by first-rate companies
that you can invest in in the United States.
JP Morgan American Investment Trust
has 90% of its assets invested in what
we call a core portfolio, which is
managed by Tim Parton and me.
And it's a very concentrated approach.
So we only own 40 stocks in total.
But in the case of Tim, he's investing predominantly
in growth companies in the US, and I'm
trying to identify value opportunities with the other 20
stocks in the portfolio.
And what this means is that over time,
we don't necessarily do well or badly in a particular market
environment.
So we think that blending growth and value into one core
portfolio gives the best of all worlds for an investment
in the US equity market.
Clearly, having a portfolio with only 40 stocks
is a fairly concentrated approach.
So we're making active decisions.
And of course, it's available in the investment trust vehicle
with low expenses, and over time,
has proven to be not only a good exposure to the US market,
but to do a little bit better than the average investor.
We both are looking for the same sort of quality characteristics
in the companies we invest in.
So these are typically very strong business models
within their industry.
They may have a very high market share.
And in particular, they have strong management teams.
Now, Tim, of course, is a growth investor.
And he's really looking to grow value
by investing in companies that have
a strong tailwind from what we call secular
growth in their particular industry,
whereas I might be investing in companies that are in more
mature industries, but where the cash flow and the earnings
are strong, and we may get good dividend growth,
and we may find shareholder value growth in other ways.
And when it comes to identifying the right management
teams, of course, with a concentrated portfolio where
every holding really has its own significant risk and reward,
we really want to find managements
who have skin in the game, who have their interests aligned
with us.
So we'd like to see them have a significant equity ownership
themselves, and that be the important driver
of how they think about managing the company,
they think about risks, they think
about how to grow the value over the long-term.
And so insider ownership, as we call it,
is an important characteristic.
Now, obviously, these companies--
there does come a time when we need to move on.
And so for me, particularly, as a value investor,
we've identified a good company, it's an attractive valuation.
And a few years later, lo and behold, it's in favor,
and it's a very high valuation.
And we feel that's time to maybe recycle
into another similarly good company, but one that's
not so much in favor and is trading
at a more attractive valuation.
And that's always a good thing, because it normally
means we've made a nice return in the interim.
There are a few occasions, I have to admit,
when we realize that our analysis of the prospects
of the company-- the fundamentals, as we call them--
are erroneous.
And so there are times when we have to move on
because we've made a mistake.
Normally we're fairly quick to do that,
and generally, there is another good alternative
to replace the company with.
So the interesting thing about both Tim Parton and me
is that we've been based in New York with JP Morgan
for, I think, probably 30 years in the case of Tim,
and a little bit longer for me.
And being part of JP Morgan, we have the best resources
available.
We're obviously one of the biggest asset managers
in the world and have one of the biggest US equity research
departments.
So it's a great comfort for me, when
I identify a company, that there's an analyst, who
spends much more time than I do, researching
this particular name.
He or she will have much more knowledge of the company.
They'll know the management probably personally.
And so it's a great resource that we have available.
In the case of Tim, he actually has a dedicated team
of growth stock analysts supporting him.
The other thing about being in New York, of course,
is that the company management teams
do like to come to New York.
And typically, JP Morgan will be a port of call for them.
So typically, we can actually converse with the management
teams in our own office in New York on a fairly regular basis.
Now, naturally, over the course of 2020, 2021,
that wasn't possible because of the COVID restrictions.
But I have to say that we continued, really,
without missing a beat, interviewing management
teams over Zoom, Microsoft Teams, whatever the method was,
and it continued apace during that time.
Now we're almost back to normal.
Well, one of the great advantages
of an investment trust is the ability
to keep the expenses less.
So we think that the expense ratio for the JP Morgan
American Investment Trust makes it a particularly attractive
vehicle.
But in addition to that, we can use what is called gearing.
So this means a very modest level
of borrowing against the portfolio
so we can issue debt at a low cost.
And if you assume that over time that the
returns from the US equity market--
and I'm talking, you know, long-term--
will exceed the cost of that borrowing, that,
too, will enhance the ultimate returns to shareholders.
Now, I'm not talking about, you know,
a huge amount of debt here-- you know, typically up to about 10%
of the overall portfolio, which we do not
consider to be a significant risk overall.
So that, to me, is something that other investment vehicles
cannot offer, and enhances the JP Morgan Investment
Trust's appeal.
We also have an exposure to the smaller companies
sector in the United States.
We have a strong investment team focusing on small smaller
companies in the US.
And again, we'll vary the exposure
to that segment of the trust over time,
depending on how we see the opportunities.
But typically, it makes up between, actually,
zero or 10% of the overall portfolio,
and we think that's another advantage
we have for the American investment trust.