12th Jun 2020 14:04
(Alliance News) - JPMorgan European Smaller Companies Trust PLC on Friday said it underperformed its benchmark in its most recent financial year due mostly to gearing.
The London-based smaller companies investor reported a net asset value total return of negative 17.6% for its financial year ended March 31, underperforming the Euromoney Smaller European Companies net total return index, excluding the UK, by 4.8 percentage points.
Most of this underperformance took place in the the final three months of the company's year.
"The biggest detractor from performance was gearing as the portfolio was over 10% geared at the start of the sharp Covid-19 related drawdown in late February. As visibility worsened, we reduced gearing sharply by the end of March," investment managers Francesco Conte and Edward Greaves explained.
Other performance detractors were "companies with weaker balance sheets" such as French technical services provider Spie and Swiss semiconductor manufacturer AMS, "which became a significant concern for investors following the Covid-19 outbreak". JPMorgan European Smaller Co sold its positions in both of these, along with its stake in Swedish facilities manager Coor, in order to reduce gearing.
JPMorgan European Smaller Co has proposed a final dividend of 5.5p per share for financial 2020, equal to its financial 2019 dividend.
Chair Marc van Gelder said: "At the time of writing it is difficult to predict the ultimate impact of the Covid-19 virus spread and the political, economic and societal outcomes and costs are very uncertain. Globally there are also continuing issues to address, not least the Brexit trade negotiations between the United Kingdom and the European Union, but also trade friction between the US and China.
"Notwithstanding the uncertainties we have confidence in the investment managers' ability to position the portfolio to weather the storms ahead and reiterate their belief that the pandemic will not change the principal investment themes in the portfolio - environmental improvement, technology and wellness."
Shares in JPMorgan European Smaller Co were down 0.2% at 329.31p in London on Friday afternoon.
By Anna Farley; [email protected]
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