A crowded field for ‘alternative investments’

Where Aberdeen Standard Investments failed so miserably with a global sustainability trust last year, might rival JP Morgan succeed?

It is launching an investment trust offering private investors a diversified portfolio of “real assets” in property, infrastructure and transport.

The JP Morgan Global Core Real Assets Trust aims to provide capital growth and steady income by generating an annual total return of 7-9 per cent after fees. Once fully invested, 4-6 per cent of that return will come in the form of quarterly dividends, although in its first year it will target an initial dividend yield of 2-3 per cent.

Sound familiar? It is. This is similar to Aberdeen Standard’s attempt to lunch a Global Sustainability Trust last year. But uninspiring marketing and a prospectus cluttered with jargon failed to raise the initial £200 million target. This was quite a setback for the Aberdeen-standard merger, which boasted of a mightily enhanced marketing and distribution muscle. Clearly size alone was no substitute for an ability to engage investors.

JPM is seeking to raise £100 million although it hopes to raise possibly up to £150 million.

It is setting forth with an investment product that may appeal to investors looking to spread their nest egg beyond the usual FTSE 100 tracker lookalikes and one which has defensive appeal in an uncertain and turbulent period for the UK stock market. To boost its management credentials, it has hired John Scott, former chairman of Scottish Mortgage Trust, to chair the new company. The investment manager is Jamie Kramer, head of the Alternative Solutions Group, which operates mainly in London, New York, Hong Kong and Singapore.

Simon Crinage, head of investment trusts at JP Morgan Asset Management, said the new trust could be the “hub” around which investors could add the existing specialist and largely Uk-focused investment trusts.

It will invest in six institutional funds run by JP Morgan’s Alternative Solutions Group previously unavailable to retail investors in the UK. However, “fund-offunds” vehicles have not been universally popular and investors may balk at the prospect of two sets of management charges: the new trust will have an annual ongoing charge of 0.98 per cent of the fund’s net asset value (NAV) – this on top of charges imposed by the existing institutional funds.

However, the new trust argues that it can combine around 500 underlying holdings in listed real estate investment trusts, prime physical properties, aircraft, shipping, trains, utilities, power supply and roads, and provide its investment returns with a third less volatility than global equity markets. It will also offer an element of inflation protection with revenues from running infrastructure assets and property rents rising in line with the cost of living.

Crinage told the Investment Trust Insider website last week: “For investors seeking to build more resilient portfolios by looking beyond traditional asset classes, JARA aims to provide a less-correlated source of income and return, with lower volatility than a basic 60/40, stock/bond portfolio”.

Will it succeed? The “alternative investments” sector is starting to look crowded and performance is mixed. JPM’S £87 million Multi Assets Trust has had a slow start and its shares trade just below their flotation price on an 8 per cent discount to net asset value. Other trusts in the sector include RIT Capital Partners, Ruffer Investment Company and Capital Gearing Trust.

But at least JPM has avoided resorting to that investment buzzword of our times: “sustainability”. Seldon has a term been stretched so thinly across so many companies and activities, with a complexity of definitions to cover everything from battery-driven cars to vegetarian alternatives for pet food. What next – cat flaps with solar panels?

Minimum investment is £1,000 and the offer period closes on 19 September.