J.P. Morgan Asset Management has announced its intention to launch a London-listed investment company offering investors high income with the potential for capital growth from a portfolio of global convertible securities - the JPMorgan Global Convertibles Income Fund.
The new investment company will access convertible securities from around the world. Convertibles offer investors bond-like characteristics in falling equity markets with the potential to participate in rising markets. The company will initially target a 4.5% annual dividend and will be managed by J.P. Morgan Asset Management's convertible bond team, headed by Antony Vallee.
The investment company structure allows greater freedom to invest in new issues, and small and mid-cap issues where liquidity constraints restrict the ability of rival open-ended funds to invest. In addition, a closed-ended fund offers investors the potential for predictable, steady income in a low-cost structure.
Antony Vallee, Head of Convertibles at J.P. Morgan Asset Management, said: "There has been a growing interest in convertible bonds as investors search for yield. This, coupled with the rising trend of established companies around the world turning to convertible bonds as a way of raising cash, means that we believe the time is right for this investment company. This is global equity income for the cautiously optimistic.
"With the developed world facing a fourth round of ‘quantitative easing' in the US and new measures to tackle the sovereign debt crisis in Europe, we believe investors can look to convertibles to provide them with a well-diversified global portfolio and comfort in an unsure market. For some investors convertibles are becoming an attractive financial instrument to allow them to take a step from bonds to equities. By employing J.P. Morgan's well-developed convertible bond investment process, we aim to provide investors with exposure to a breadth of strategies and to the full range of the global convertible bond universe, including the important new issue market. This is an area of the market that existing open-ended funds cannot fully capitalise on as they need to carry liquidity."
Simon Crinage, Managing Director, Investment Trusts, at J.P. Morgan Asset Management, added: "In our view, now is the ideal time to launch this company - convertibles performed well in 2012 and we believe this is set to continue. The company will focus on quality bonds that ensure investors get the benefits of stock market upturns but with the protection of bonds: superior risk-adjusted total returns and reduced volatility. Our dedicated convertibles team has managed convertibles since 1995 and, with nearly $5bn under management, we are one of the world's largest convertible bond investors."
Full details of the investment company will be available shortly.
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