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JP Morgan: ‘Investors need to be careful in the next couple of years’

JP Morgan’s managing director Clare Hart on solid fund performance, new sector opportunities for trading and why managing a fund during a topsy-turvy market never comes as a challenge

“It’s going to be volatile between now and the election. And it’s not a cheap market. You need to be careful where you put your money in the next couple of years.” This is the advice given by JP Morgan managing director and portfolio manager of the JPM US Equity Income fund Clare Hart. She adds: “This [2020 US presidential] election will be a headache for the market.”

But managing a fund in turbulent markets and uncertain elections is not a fresh challenge for Hart. Managing the fund since 1999, she is now in her 20th year at the fund giant and has seen solid fund performance since inception. Looking over the past 10 years, the fund has beaten the average fund in the North America Investment Association sector, which comprises 152 funds. The JPM US Equity Income fund saw 329.9 per cent growth, while the sector average had just 287.6 per cent.

In more recent history, the fund saw 14.1 per cent over the 12 months to 17 May, compared with 11.5 per cent for the sector average.

The JPM US Equity Income fund is a mirror of the Equity Income mutual fund in the US. Hart explains the only difference is the benchmark used in the UK (the S&P 500) is different to that in the US (Russell 1000 Value) in order to have a recognisable benchmark for UK investors.

She found to start with, UK investors did not look at the fund, instead favouring ones with a UK or European focus, but sentiment has changed over the past 10 years and now there is more competition than ever in the space.

The daily portfolio management does not differ between managing a US mutual fund at an open-ended investment company because regulatory functions are managed elsewhere in the building. “They are exactly the same portfolios so it’s not hard. It may look like we are underweight in pockets, but it’s just the benchmark change,” she says.

Currently, the fund is weighted heavily in financials and healthcare – the largest industries in the US – although the fund is managed with a bottom-up strategy. Top holdings include Chevron, Bank of America and Microsoft.

Sector focus
Hart says: “We are spending a lot of time and working in areas we see some dislocation; in places where we can make decent money. At the moment, I am seeing a lot of dislocation in healthcare, energy and some in technology. Those are the areas we’re doing most of our trading and looking at new opportunities – especially healthcare.”

A lot of her day is spent speaking to chief executives or chief financial officers of companies the fund either holds or is looking to hold. “I spend most of the day trying to pick the management that is most important to get to. I try to see as many management teams as possible then fill the gaps in around that.”

While the US market is the largest in the world, many stocks are now global companies rather than on a domestic level. Hart says it is “really important” to have a global perspective on some sectors. Ones she highlights are pharmaceuticals and energy.

Starting her career after graduating with a BA in political science from the University of Chicago, Hart dabbled in a few careers before setting her sights on fund management. She was a public accountant at now defunct Arthur Andersen after graduating, then becoming a paralegal, which she decided was not for her because the people were “too mean”.

She then landed at Salomon Smith Barney where she was in the equity research division covering real estate investment trusts. “It’s entertaining in retrospect – I wanted to work on Wall Street because lawyers were too mean,” she says.

Hart says one of the “luxuries” of working at a large company such as JP Morgan is the infrastructure and the large team she has behind her.

“I spend as little time as possible marketing,” she says. She instead prefers to focus on fund management. Selling her fund is not something she enjoys doing, instead leaving it to the sales team.

“People deserve to speak to the person holding their money, but we have specific people doing it. I still get the feedback.”

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