JPM US Equity Income

Despite the naturally lower yielding nature of the US market, it has a long history of dividend payments, an increasing number of companies now paying a dividend and a number of dividend aristocrats – companies that have increased their dividends for 25 consecutive years or more. JPM US Equity Income fund targets an above-average income by investing in a diverse range of established stocks. Manager Clare Hart has a wealth of experience and the help of co-manager Jonathan Simon, along with a huge team of analysts, to filter down the whole US market into a portfolio of 85-110 stocks.

Our opinion

This is a core equity income holding investing in the world's largest stock market. Manager Clare Hart keeps an astute eye on risk management, with a diverse spread of names to ensure a stable, above-market yield. The strength and depth of the analyst resource, and experience of the managers, means this fund can achieve an income whilst also participating in long term capital growth.

Fund manager

The lead manager is Clare Hart, who is supported by co-manager Jonathan Simon and a large team of analysts. Clare has worked at JPM since 1999. Before that she worked at Salomon Smith Barney in its equity research division covering Real Estate Investment Trusts (REITs). She started her career at Arthur Andersen as a public accountant and has a BA in Political Science from the University of Chicago, as well as an MSA from DePaul University.

Jonathan has been at JPM since 1980 and works on a variety of funds both as a lead and back-up manager. He joined the firm as an analyst in London, before transferring to New York in 1983. He became a portfolio manager in 1987 and holds an MA in Maths from Oxford University.

Value, for me, is about when, not if. I look at some value stocks, and there are a lot of ifs—if this doesn’t happen, X won’t go bankrupt. If rates stay low, they can deliver and be OK. I try to find the ‘whens’ in the market.

Clare HartFund manager

Investment process

The managers of JPM US Equity Income will look for undervalued companies that exhibit durable franchises and strong management teams. The process has four stages. The first of these is idea generation and will filter out the companies that do not have the basic investment characteristics the managers look for. They then carry out fundamental analysis to see if there is any investment appetite for the stocks, before undertaking a valuation analysis. The final stage is portfolio construction, which is led by Clare. She will want a minimum of a 2% yield from each company at point of entry and will compile the portfolio with diversification in mind.

Sector positioning will be an outcome of stock selection. The fund does not avoid any sector in particular, but can have a zero weighting if there are no attractive opportunities, and will be naturally underweight cyclical or commodity names as the dividend, is often unreliable from these companies.

ESG

ESG - Integrated  

JPM takes an integrated approach to ESG investing, and considers Environmental, Social and Governance as financially material in investment analysis and investment decisions. JPM addresses ESG issues at three different stages of the stock selection process: research, engagement, and portfolio construction. Research: JPM’s analysts incorporate ESG considerations into their analysis to gauge the sustainability of a business, the quality of management and any potential risks. Such considerations are addressed in their 40-question ESG Checklist, with 12 specific questions on environment, 12 on social and 16 on governance. The primary goal is to identify the key risks and potential opportunities associated with the company. Engagement: JPM believes active engagement with companies, not only to understand how they consider ESG issues but also to try to influence their behavior and encourage best practice, is key to the investment process. Where social or environmental issues are the subject of a proxy vote, JPM will consider the issues on a case-by-case basis. Portfolio construction: While JPM does not exclude individual stocks explicitly on social, environmental or ethical criteria, ESG factors could affect the degree of conviction and impact a stock’s position sizing during portfolio construction.

Risk

The firm has a dynamic risk approach, applied by both Clare and the compliance team. They will evaluate risk on a relative basis. They use external reports, generated on a daily basis to ensure they take no unintended bets. JPM US Equity Income fund has a CIO for oversight, who has a set of guidelines to follow. Clare will be subject to quarterly reviews, which will look at the fund's profile versus its objectives.

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