JP Morgan is bringing its expertise as one of the world’s largest and most reputable investors in the area of so-called real assets to ordinary savers with the launch of its Global Core Real Assets investment trust.
The trust has the ticker JARA – JPM Morgan Global Core Real Assets – offering investors access to over 500 ‘real assets’ around the world across areas such as real estate, transportation and infrastructure.
UK investors already have access to some of the individual themes within real assets such as infrastructure or real estate through existing investment trusts, but what makes JARA attractive is the global nature of its investments and the sheer spread of them.
The other very attractive element for private investors is the level of income and potential total return the trust is aiming for.
The initial dividend yield on the ordinary shares will be 2-3% which the trust expects to pay very early in its life, probably in the first quarter of next year, but when the trust is fully invested that figure should rise to 4-6%.
Overall the shares are aiming for a total return of 7-9% per annum, which would make the trust one of the higher performing not just in the real assets sector but across a broader range of investment areas.
JP Morgan describes real assets as: ‘tangible assets that provide the vital services that keep society running smoothly, from the production and distribution of renewable energy and natural gas, to aircraft, airports and warehouses.’
It has been offering large institutional investors such as pension funds access to investments like this for many years, as part of a wider group of investments known as alternative investments. They are described as this because they are alternatives to traditional bonds and equities and JPM Morgan is the third largest ‘alternatives’ investors in the world managing around $145bn.
The offer for shares in JARA closes on the 19 September, or for ISA applications today (18 September) and shares are expected to start trading on Monday 23 September. Shares are available through most wealth managers and investment platforms.
The trust initially aims to raise up to £100m with the initial share issue, but judging by the success of other investment trusts in the infrastructure sector, some of which are £1bn in size, it would not be a surprise if JPM issues more shares in the new year, but there are no formal plans currently public.
Many existing investment trusts in these sectors are heavily focussed on UK-based investments in these areas, but JPM Morgan’s trust will have only about 5% of its investments based in or linked to the UK.
This will create genuine diversification and a portfolio largely uncorrelated to main stream global equity and bond markets, which is another potential appeal of the trust’s shares.
JARA will have between 30-50% of its investments in global real estate, split evenly between the US and the Asia Pacific regions, and similarly in listed real assets, which will account for up to 30% of the portfolio; about half will be exposed to listed US Real Estate investment trusts, with global transport taking up the rest of the trust.
It will spread its assets across around 500 individual investments, which will be a spread of assets listed on stockmarkets and some which are private.
The general nature of real assets is that they are described as ‘illiquid’ namely they are not traded as often as large blue chip equities or government bonds.
But because JARA is a listed investment trust private investors will be able to buy and sell their shares on a daily basis if they need to, but the benefit of holding them will come in the longer term – likely to be a five to seven year period – where investors will get the full benefit how some of the real assets perform over a longer economic cycle.
What Investment View: JARA is offering a very attractive income level and potential for share price capital appreciation in an area of investing which is very hard for ordinary private investors to get exposure to. JP Morgan expertise in this sector for many years makes this an investment trust which many private investors should consider if they are looking for income and growth.