WEBVTT

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[UPLIFTING MUSIC]

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So my name is Jonathan Simon.

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I'm one of the two
principal portfolio

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managers of the JP Morgan
American Investment Trust.

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I have spent the
bulk of my career--

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actually, more than
30 years-- being

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based in New York
with JP Morgan Asset

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Management as an equity
portfolio manager.

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Interestingly, my co-PM,
whose name is Tim Parton,

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has a fairly similar profile.

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He moved to New York, I
think, in the early 1990s,

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so just over 30 years ago.

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And he's also been a specialist
in US equities from that date.

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So we have a lot
of similarities,

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and we are co-portfolio managers
of the JP Morgan American

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Investment Trust.

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Well, the question
of often comes up as,

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why invest in the United States?

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And in the first
answer is clearly

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that it is the largest
equity market in the world.

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In fact, it makes up some 60%
of all global equity markets.

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But not only that,
it also offers

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diversification across
pretty much every industry.

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We always think about technology
and the leading companies

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and the innovation that comes
out of the United States,

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but also, you have financial
services and health care,

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industrial
manufacturing-- pretty

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much every sector of
the global economy

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is covered by
first-rate companies

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that you can invest in
in the United States.

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JP Morgan American
Investment Trust

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has 90% of its assets
invested in what

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we call a core
portfolio, which is

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managed by Tim Parton and me.

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And it's a very
concentrated approach.

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So we only own 40
stocks in total.

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But in the case of Tim,
he's investing predominantly

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in growth companies
in the US, and I'm

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trying to identify value
opportunities with the other 20

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stocks in the portfolio.

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And what this means
is that over time,

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we don't necessarily do well
or badly in a particular market

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environment.

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So we think that blending
growth and value into one core

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portfolio gives the best of
all worlds for an investment

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in the US equity market.

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Clearly, having a portfolio
with only 40 stocks

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is a fairly
concentrated approach.

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So we're making
active decisions.

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And of course, it's available
in the investment trust vehicle

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with low expenses,
and over time,

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has proven to be not only a
good exposure to the US market,

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but to do a little bit better
than the average investor.

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We both are looking for the same
sort of quality characteristics

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in the companies we invest in.

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So these are typically
very strong business models

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within their industry.

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They may have a very
high market share.

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And in particular, they have
strong management teams.

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Now, Tim, of course,
is a growth investor.

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And he's really
looking to grow value

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by investing in
companies that have

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a strong tailwind from
what we call secular

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growth in their
particular industry,

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whereas I might be investing
in companies that are in more

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mature industries, but where
the cash flow and the earnings

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are strong, and we may
get good dividend growth,

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and we may find shareholder
value growth in other ways.

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And when it comes to
identifying the right management

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teams, of course, with a
concentrated portfolio where

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every holding really has its
own significant risk and reward,

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we really want to
find managements

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who have skin in the game, who
have their interests aligned

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with us.

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So we'd like to see them have
a significant equity ownership

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themselves, and that
be the important driver

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of how they think about
managing the company,

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they think about
risks, they think

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about how to grow the
value over the long-term.

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And so insider
ownership, as we call it,

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is an important characteristic.

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Now, obviously,
these companies--

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there does come a time
when we need to move on.

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And so for me, particularly,
as a value investor,

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we've identified a good company,
it's an attractive valuation.

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And a few years later, lo
and behold, it's in favor,

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and it's a very high valuation.

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And we feel that's
time to maybe recycle

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into another similarly good
company, but one that's

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not so much in
favor and is trading

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at a more attractive valuation.

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And that's always a good
thing, because it normally

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means we've made a nice
return in the interim.

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There are a few occasions,
I have to admit,

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when we realize that our
analysis of the prospects

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of the company-- the
fundamentals, as we call them--

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are erroneous.

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And so there are times
when we have to move on

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because we've made a mistake.

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Normally we're fairly
quick to do that,

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and generally, there is
another good alternative

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to replace the company with.

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So the interesting thing
about both Tim Parton and me

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is that we've been based
in New York with JP Morgan

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for, I think, probably 30
years in the case of Tim,

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and a little bit longer for me.

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And being part of JP Morgan,
we have the best resources

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available.

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We're obviously one of
the biggest asset managers

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in the world and have one of
the biggest US equity research

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departments.

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So it's a great
comfort for me, when

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I identify a company, that
there's an analyst, who

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spends much more time
than I do, researching

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this particular name.

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He or she will have much more
knowledge of the company.

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They'll know the management
probably personally.

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And so it's a great resource
that we have available.

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In the case of Tim, he
actually has a dedicated team

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of growth stock
analysts supporting him.

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The other thing about being
in New York, of course,

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is that the company
management teams

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do like to come to New York.

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And typically, JP Morgan will
be a port of call for them.

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So typically, we can actually
converse with the management

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teams in our own office in New
York on a fairly regular basis.

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Now, naturally, over the
course of 2020, 2021,

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that wasn't possible because
of the COVID restrictions.

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But I have to say that
we continued, really,

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without missing a beat,
interviewing management

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teams over Zoom, Microsoft
Teams, whatever the method was,

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and it continued apace
during that time.

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Now we're almost back to normal.

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Well, one of the
great advantages

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of an investment
trust is the ability

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to keep the expenses less.

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So we think that the expense
ratio for the JP Morgan

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American Investment Trust makes
it a particularly attractive

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vehicle.

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But in addition to that, we
can use what is called gearing.

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So this means a
very modest level

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of borrowing against
the portfolio

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so we can issue
debt at a low cost.

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And if you assume that
over time that the

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returns from the
US equity market--

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and I'm talking, you
know, long-term--

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will exceed the cost of
that borrowing, that,

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too, will enhance the ultimate
returns to shareholders.

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Now, I'm not talking
about, you know,

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a huge amount of debt here-- you
know, typically up to about 10%

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of the overall portfolio,
which we do not

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consider to be a
significant risk overall.

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So that, to me, is something
that other investment vehicles

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cannot offer, and enhances
the JP Morgan Investment

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Trust's appeal.

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We also have an exposure
to the smaller companies

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sector in the United States.

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We have a strong investment
team focusing on small smaller

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companies in the US.

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And again, we'll
vary the exposure

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to that segment of
the trust over time,

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depending on how we
see the opportunities.

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But typically, it makes
up between, actually,

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zero or 10% of the
overall portfolio,

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and we think that's
another advantage

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we have for the American
investment trust.

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