JPM ASEAN Equity D (acc) EUR

Analyst Report
Morningstar's Take

by Claire Liang, CFA
The Luxembourg-domiciled JPMorgan Funds-ASEAN Equity Fund’s benchmark will be changed from the MSCI AC ASEAN Index to the MSCI AC ASEAN 10/40 Index effective 30 Nov 2021. The Hong Kong-domiciled JPMorgan ASEAN Fund, which is managed under the same strategy, will experience the same benchmark change. We do not expect any divergences between the two vehicles resulting from this benchmark change. This change does not affect the strategy’s investment approach, and we maintain both vehicles’ existing Morningstar Analyst Ratings.

This change is logical. The MSCI AC ASEAN index captures large- and mid-cap companies across Indonesia, Malaysia, the Philippines, Thailand, and Singapore. In February 2021, MSCI announced that eligible foreign listings will be included in the MSCI Singapore (the Singapore component of the index) over four phases from May 2021. Over time, these eligible foreign listings may make up 10% or more of the index, whereas the Luxembourg-domiciled vehicle can only invest up to 10% in individual stocks due to the UCITS diversification rules. Changing the benchmark to the MSCI AC ASEAN 10/40 Index will provide a better reflection of the vehicle’s portfolio construction constraints and thus is a better performance comparator.

We continue to think highly of JPM ASEAN Equity’s strong management team and well-codified approach. The vehicle’s cheaper share classes, including the C (acc) USD clean share class, continue to merit Morningstar Analyst Ratings of Gold, while its more expensive share classes land at Silver and Bronze, depending on their fee level.Pauline Ng has led this strategy through its HKUT vehicle since January 2009. She boasts 20 years of investment experience, most of which have been in ASEAN equities. Ng is joined by three comanagers, who are the country specialists from her five-member ASEAN team and sport an average 16 years of experience. The four managers have been working together for nine years and consistently demonstrated great synergy and shared investment philosophy during our meetings. Ng values teamwork and operates her ASEAN team with a spiderweb structure where investment ideas are scrutinized by multiple team members, which we believe helps reduce key-person risk. In addition to the ASEAN team, the managers are also well-supported by 15 sector analysts/specialists within JPMorgan’s emerging-markets and Asia-Pacific equities (EMAP) team. The bottom-up process is well-structured and has proved its efficacy over multiple market cycles. It is backed by JPMorgan’s standardized strategic classification framework, which classifies prospective holdings into three distinct buckets--premium, quality, and trading. The managers fully leverage both EMAP team’s research input and the ASEAN team’s local knowledge to generate stock ideas, which has enabled the strategy to capture opportunities across the market-cap spectrum. In addition to the strategic classification framework, the managers further define the opportunity list based on a stock’s target holding period and trading strategy and focus on risk/reward opportunity levels in portfolio construction. Ultimately, the managers build a 50- to 100-stock portfolio, with consistent overweight positions in premium and quality rated stocks relative to the MSCI AC ASEAN Index. Ng has delivered for investors since the inception of this SICAV vehicle in September 2009. Through 30 June 2021, its A (acc) USD share class’ 7.72% annual return beat the MSCI AC ASEAN Index’s 5.03% and 76% of its peers. Overall, the strategy has many strengths, and we are confident that the strong results are repeatable with Ng at the helm.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleSupporting
Morningstar Pillars
A highly experienced and stable management team backed by deep analytical resources.
ParentAbove Average
A strong investment culture.
A bottom-up approach that is well structured and consistently applied with great long-term success.
A standout long-term record.
Morningstar Analyst RatingMorningstar evaluates funds based on five key pillars, which it's analysts believe lead to funds that are most likely to outperform over the long term on a risk-adjusted basis.
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