Anyone who knows how IFAs love to churn portfolios will not be surprised to learn that one in two IFAs agreed with JP Morgan Fleming Asset Management (JPMFAM) when the fund manager advised them to tell their clients to adopt a more aggressive approach in weak stock markets – preferably by using the new breed of “dynamic” funds pioneered by JPMFAM.
Assets in dynamic funds now exceed 500 million. Chief beneficiary of this inflow has been JPMorgan Fleming’s own JPMF UK Dynamic Fund, one of the first dynamic funds to hit the market, whose assets under management have grown by 400 per cent since launch in October 2000 to stand at 64 million as at end-August 2002.
JPMorgan Fleming uses the term ‘dynamic’ to refer to funds which use an aggressive investment approach in order to capture greater investment returns. Typically, this means having no constraints in terms of benchmark index weightings, leaving the fund manager free to invest in the most attractive stocks he can find.
In research amongst IFAs conducted on behalf of JPMorgan Fleming last autumn, more than 50 per cent of those polled agreed that investors needed to take a more aggressive stance in order to counter the trend for more subdued stock market returns. One in four IFAs also said that the number of aggressive funds would increase significantly over the next two years – a trend clearly borne out by the introduction of at least nine ‘dynamic’ style UK funds since JPMF UK Dynamic Fund was launched.
Investors who took these IFAs’ opinions to heart have been rewarded, says JPMFAM. Since launch, nearly two years ago, JPMF UK Dynamic Fund has sat in the top 10 percent of its sector and has outperformed the FTSE All-Share Index by 15 percent. Over 1 year to 1 August 2002, it ranks second out of 291 funds, declining by only 5.9 percent against a dive in the FTSE All-Share Index of 20.8 percent (source: Standard & Poor’s Micropal, mid-market prices, with net income reinvested).
Ross Hollyman, joint-fund manager of JPMF UK Dynamic Fund with Ajay Gambhir commented: “Since the technology bubble burst, the double-digit returns of the 1990s seem to have evaporated. In times such as this, investors generally fall in one of two camps. First is the fear/risk averse investor who sells and locks in their losses. Second are the realist/absolute investors who remain fully invested for the long-term and seek ways to maximise their returns.
Hollyman continued: “It is those in the second camp who are driving the increase in assets in aggressive funds. Given the impressive outperformance of funds like JPMF UK Dynamic Fund, we anticipate that these funds will continue to become even more popular as investors seek to maximise return in this difficult stock market environment.”