JPMAM launches Global Convertibles Income investment company
J.P. Morgan Asset Management announces the launch of JPMorgan Global Convertibles Income Fund Limited by way of a placing and an offer for subscription. The offer for subscription, which opened on Friday 17 May, will close on 5 June 2013. It is expected that the shares will begin trading on 11 June 2013.
The Guernsey-domiciled investment company will give investors access to a globally diversified portfolio of convertible securities from a broad range of sectors, offering income alongside the potential for long term capital growth. Convertible securities offer investors the potential to participate in rising equity markets while providing bond-like defensive characteristics in falling equity markets. J.P. Morgan Asset Management believes that 2013 could see strong performance from convertibles as their equity sensitivity should benefit from the rallies currently witnessed in equity markets, while bond protection should act as a safeguard against any setbacks.
The Company will target an initial gross dividend yield to shareholders of 4.5% in the first financial year and will be managed by J.P. Morgan Asset Management's convertible bond team, headed by Antony Vallee. Dividends will be paid half-yearly in the first year, with the intention of moving to quarterly dividend payments thereafter. The Company will pay a management fee of 0.75% per annum on net assets, and the issue price per share will be 100p, with an expected opening net asset value per share of at least 98p. The Company is looking to raise assets of at least £100m. There is a minimum investment of £1,000 under the Offer, and multiples of £1,000 thereafter, with no maximum investment limit. The Company is eligible to be held in an individual savings account (ISA).
Antony Vallee, Head of Convertibles at J.P. Morgan Asset Management, said: "Five years ago there were many cheap ways to access yield and growth potential, and in an environment when bond yields were high and equity prices depressed, convertibles were not popular. But since the global financial crisis, plenty of companies have issued convertibles and UK investors are becoming more familiar with them again. As such, we think demand for convertibles as an asset class will increase. This year alone, we have already seen $26.7bn of convertibles issued, which at an annualised rate would equate to $80.2bn, more than was raised in 2012 or 2011.
"If you compare convertibles with bonds, it's often hard to get excited about the yields on offer on investment-grade government and many corporate bonds. Additionally, with bank finance increasingly hard to come by, there has been a general change in the landscape, and companies - particularly smaller ones and those not rated by the credit ratings agencies - are keener to raise money on the capital markets. With companies around the world now turning to convertible bonds as a way of raising cash, we believe the time is right for this investment company.
"We have specifically chosen a closed-ended structure for this fund in order to be able to offer an attractive level of yield. Open-ended portfolios need liquidity, and they tend to get this from holding bonds issued by very large, liquid companies, which tend issue bonds with relatively low levels of coupon. As a closed-ended fund has a stable pool of capital that is less affected by inflows and outflows, the requirement for liquidity at the portfolio level is lessened, and we can therefore focus on convertible bonds offering a higher level of income, such as those issued by small and mid cap companies. This is global equity income for the cautiously optimistic. The closed-ended structure also allows us to take a longer-term view.
"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 across the global convertible bond universe, including the important new issue market."
Simon Crinage, Head of Investment Trusts at J.P. Morgan Asset Management, added: "In our view, the closed-ended structure is ideally suited to investment in a convertibles strategy focused on income and yield. With convertibles performing well in 2012 and continuing to do so into 2013, we feel now is the perfect time to launch this company. We are extremely excited to be adding this investment company to our range, offering investors the potential for superior risk-adjusted total returns with reduced volatility. Our dedicated convertibles team has managed convertibles since 1995 and, with approaching $5bn under management, we are one of the world's largest convertible bond investors."
Full details of the investment company can be found at: jpmconvertiblesincome.co.uk