JPMAM launches four new 130/30 funds for institutional investors

JPMorgan Asset Management (‘JPMAM’) has announced the launch of four JPM 130/30 Funds (‘the Funds’) aimed at institutional investors.

JPM 130/30 is a new breed of equity investment, designed to work harder and smarter than traditional long-only equity strategies. 130/30’s popularity lies in its ability to better capitalise on positive stock positions while also exploiting negative stock insights. The result is the potential to produce higher expected alpha without adding appreciably to overall portfolio risks.

The four new funds are:

JPM US Select 130/30 Fund
JPM US 130/30 Fund
JPM Europe Select 130/30 Fund
JPM Europe 130/30 Fund

These Funds aim to give fund managers the freedom to attain greater returns from their investment insights and processes. This is done by enhancing traditional long-only investing by taking an extra short exposure in unattractive stocks, offset by further long positions in the most attractive companies. These long-short positions are set at a fixed portion of portfolio value – usually in the 20% to 40% range – so that, for example, a “130/30” portfolio would be one that is long 130% and short 30%. This means 130/30 managers can harvest their insights into unattractive stocks, giving them the opportunity to benefit materially from the stocks they believe will fall in value. They can also take more positions in the stocks they find most attractive in order to further gain from their expected appreciation.

Peter Ball, Head of UK Institutional Business for JPMorgan Asset Management said, “JPMAM has been at the forefront of the industry in developing and managing 130/30 funds, with the launch of one of the first 130/30 funds in the US in 2004. Alongside this and a depth of experience and breadth of stock coverage around the world, as well as our rigorous stock ranking systems and disciplined portfolio construction techniques that give JPMAM considerable competitive advantages when it comes to 130/30 investing.”

Four reasons why 130/30 strategies are appealing:

1. Greater capital committed to insights. Shorting permits managers to commit more capital to stocks where they have high conviction — both in long as well as in short positions.

2. Efficient use of stock research. Managers can fully leverage their investment insights into unattractive stocks and thus maximize returns.

3. Increased diversification. Allowing managers to extend their long only portfolio through shorting and exploit the entire breadth of research results in greater portfolio diversification.

4. Fits comfortably into an existing equity allocation. Since these strategies are net 100% long at the end of the day, they can be included in the institutional investor’s long-only equity portfolio allocation.