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JP Morgan Global Core Real Assets is a new investment trust that provides exposure to a global portfolio of real estate, infrastructure and transportation assets.
JPMorgan Global Core Real Assets (LON:JARA) will aim to generate income and capital growth with a target return of seven to nine percent per annum once fully invested.This includes an attractive dividend yield of four to six percent after the first year.
It is a unique proposition as it will hold stakes in around 500 real assets, of which approximately 80% are privately held and not otherwise accessible to retail investors. JPMorgan has a long history of investing in these areas and manages $145bn of alternatives, which is more than four times the total value of the UK-listed infrastructure and property investment company sectors.
The new fund is intended to be a cornerstone investment within an income-generating portfolio. Real assets generally produce stable and predictable cash flows, which means that they tend to have a low correlation and a low level of volatility compared with the equity market.
Previously unavailable to UK retail investors
JARA will invest in six institutional private funds and managed accounts run by JPMorgan that have previously been unavailable to UK retail investors. Its underlying portfolio will consist of: 30% to 50% global real estate, 10% to 30% global infrastructure and 10% to 30% global transport, all in the private market, as well as 10% to 30% of liquid real assets.
The latter will mainly be Real Estate Investment Trusts (REITs), which the managers will access via two managed accounts. These will provide the necessary liquidity to allow them to reposition the portfolio should the need arise. It would also enable them to raise the cash to finance share buybacks in the event of the fund trading at an unacceptably wide discount.
In terms of the geographic spread, approximately 48% will be invested in the US, 32% in Asia Pacific, 15% in Europe ex UK and only about five percent in the UK itself, so the fund will offer excellent global diversification.
Management fees are expected to be just under one percent per annum
The total management fees are expected to be just under one percent per annum, although two of the underlying funds also have a performance fee of 15% of any outperformance above a seven percent hurdle rate measured over a three-year rolling period.
It is hoped that the fund will raise £150m, although if it falls short the minimum issue size is £100m. If you want to invest at the IPO you will need to get in touch with your broker by September 18, otherwise you will have to wait until the shares start trading on September 23.
There are no other directly comparable funds that provide exposure to such a broad range of mainly privately held real assets, although the nearest is probably the VT Gravis UK Infrastructure Income fund, which invests in infrastructure and property investment companies. This was launched in January 2016 and returned 33% to the end of August 2019 with an historic yield of 4.6% and a low level of volatility.