Hargreaves Lansdown has advised investors to switch out of JP Morgan Asset Management’s (JPMAM) premier equity income fund due to “poor” stock selection.
Senior analyst Meera Patel says the fund’s managers James Illsley and Sarah Emly have delivered disappointing returns and clients should switch into the Artemis income fund managed by Adrian Frost and Adrian Gosden instead.
She says: “The [JPMAM] fund aims to generate a high and rising level of income and long-term capital growth by investing in the UK stock market.
“As with many equity income funds, this naturally leads to a focus on large, cash generative companies which pay good dividends.
“This type of stock has struggled over the last five years compared to their more economically sensitive peers, but crucially our analysis suggests the managers’ choice of stocks within this area of the market has been poor, leading to disappointing returns.”
The switch recommendation comes after in 2005 Hargreaves issued a similar call to exit the JPMAM fund due to similar stock selection concerns.
Patel says: “We can see no significant reason why stock selection will improve and would therefore highlight the Artemis income fund, which has a similar investment strategy, as an alternative.
“This fund has comfortably outperformed both its sector and the broader market over the same period, primarily owing to the managers’ excellent stock selection.”