JP Morgan AM targets 4.5% yield with global convertibles income fund

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JP Morgan Asset Management has launched its Global Convertibles Income Fund after the close-ended vehicle raised £136m. The fund’s ordinary shares commenced trading today following its admission to trading on the London Stock Exchange.

Domiciled in Guernsey, the launch of the fund has been well supported, particularly by the wealth management and adviser communities, according to Simon Miller, chairman of the fund. “It is clear from the successful launch that a wide range of investors is still looking for alternative sources of income in a world of low interest rates, and can see the benefits of obtaining this through a closed-ended company focused on convertibles, an asset class that we believe is under-represented in investors’ portfolios.”

Antony Vallee, head of convertibles at JP Morgan Asset Management and manager of JPMorgan Global Convertibles Income Fund, believes that there is a strong investment case for convertibles and that now is an opportune time to take advantage of the growing convertibles new issuance market. “Convertibles provide investors with the potential to enjoy the best of both worlds – bond-like downside protection in falling markets plus capital participation in rising equity markets, translating into superior risk-adjusted total returns. We are, therefore, delighted by the level of interest we have seen in the company,” he says.

“Convertible bonds have dropped off the menu for UK investors in recent years, partly because few funds have been able to offer an attractive level of yield,” explains Simon Crinage, head of investment trusts at JP Morgan Asset Management. “By using a closed-ended structure, which, among other things, enables the company to invest in higher yielding mid and small-cap or less liquid issues, we will be able to build a portfolio that targets an initial gross dividend yield of 4.5% as well as offering the potential for some capital growth. We believe the company will be successful in the years to come as it utilises J.P. Morgan Asset Management’s market-leading investment capability in convertible bonds at the same time as offering something different for income-hungry investors.”

Winterflood Investment Trusts acted as placing agent and sponsor to the launch. James Moseley, head of investment trusts at Winterflood, says the new company recognises the unique opportunity in a closed-ended investment company and the strong investment case for convertibles. A large proportion of the funds raised came from discretionary private client brokers, demonstrating their continued appetite for income and support for the closed-ended sector, strong managers and innovative investment ideas, says Moseley. We believe that this is the correct product for cautious optimism.”