Want a rock solid shelter? Try new fund that tracks down safer global assets
WITH the tumult in Westminster reaching epic proportions and unrest permeating many other parts of the world as well, it is not surprising that many investors feel uneasy.
Stock markets are volatile, bond markets offer ridiculously low yields and savings rates are derisory. But this environment throws up opportunities too, even for cautious investors.
JP Morgan Global Core Real Assets has a clunky name – known more simply as JARA – but the concept behind it is ideally suited for the times we live in. The fund is floating on the stock market this month at £1 a share and it will invest in more than 500 physical assets, spanning property, infrastructure and transport around the world.
Investments will include blocks of flats, wind farms, airports, power plants and water distributors. Around half the assets will come from the US and Canada, another 30 per cent from places in the Asia Pacific region, such as Australia, Japan and Singapore, 15 per cent will be sourced from Europe and just 5 per cent from the UK.
Spreading investments across countries and sectors – with none accounting for more than a tiny percentage of the whole – makes JARA more defensive than many stocks. This cushion against economic and political volatility is enhanced because JARA will stick to highquality assets, with solid tenants and predictable, long-term rents.
As a result, the fund is expected to deliver an annual dividend yield of between 4 and 6 per cent and total yearly returns, including share price growth, of 7 to 9 per cent.
Dividends will be paid quarterly and, for the first year, they are likely to be nearer 3 per cent, as JARA builds up its investment portfolio. But, by this time next year, the fund should have been able to invest all its cash so the dividend will rise accordingly.
JP Morgan is no newcomer to this field. The firm has been investing in high-quality real assets for more than 40 years and built up a portfolio of property, infrastructure and transport sites, valued at more than £55billion. To date, these investments have been only offered to big, professional investment firms. JARA, however, gives individual investors the chance to participate in this huge pool of assets.
This has three significant benefits. First, it means that JP Morgan has plenty of experience and should know how to buy safe and solid assets. Second, the firm has built up an extensive network so it hears about potential investments early on, often before they are officially up for sale. Third, much of the money raised in JARA’s forthcoming flotation will be invested in assets that JP Morgan has owned for some time. This adds to the fund’s diversity because its investments will range in age, as well as by sector and region.
That means the fund can build up its portfolio quickly and start paying out those quarterly dividends.
The firm’s track record is impressive, with the real asset portfolio delivering historic returns averaging more than 10 per cent annually over the past 15 years.
For those anxious about the Brexit turmoil, JARA offers some comfort as so little of the fund will be invested in the UK and not that much in Continental Europe.
Providing further reassurance, even though four-fifths of JARA’s cash will be invested directly in real assets, the rest will go into listed property stocks, which can be bought or sold at speed if the need arises.
JARA is hoping to raise at least £100 million in the forthcoming flotation but it could raise as much as £500 million, if there is enough demand from investors. Over time, the fund could expand to £1billion or even more, although there will always be a tight focus on premium assets whose tenants can be relied upon to pay the rent.
Shares can be acquired via financial advisors or online, through firms such as AJ Bell, Hargreaves Lansdown and Equiniti.
MIDAS VERDICT: In an uncertain world, JARA could prove to be a rewarding, longterm investment, delivering solid annual income and a bit of share price growth too. At £1, the shares look attractive.