Welcome to Morningstar. I'm Holly Black with me is Austin Forey, he's Manager of the JPMorgan
Emerging Markets Trust. Hello. Good morning Holly,
and thanks for the opportunity. So, do you want to tell
us briefly what the trust does? So, the trust invests in emerging market equities,
I mean, it's very simple. We've been doing that now for almost 30 years, and we have a wide range
of investments from Latin America right around the world to China and other parts of Asia. We
are very bottom up, very long term as investors, and that's our proposition to shareholders.
So, it's been a bit of a turbulent year and I think that has been particularly seen
in emerging markets. What are you seeing across the region in terms of winners and losers?
So, you're right. I mean, it's been a very strange year. And you know some countries have done very
well through this pandemic. I think if you had said to us in February that China will be one
of the world's best performing equity markets right now, we would have been pretty surprised.
But that’s been the case. Latin America other parts of the world had a much tougher time,
and those are being very big winners and losers. In industry also you see some businesses
really accelerated by the pandemic things like eCommerce obviously, which we're all experiencing
and you've seen others transport, energy things like that really struggling because
of falls in demand. So, some big diversion in underlying performance shares and industry.
What do you see as the biggest risks for investing in emerging markets at the moment?
I mean, I think that they are no different, really to risks that you see elsewhere in the
world. I mean clearly some countries will struggle with economic growth coming out of the pandemic,
others I think will continue to see higher rates of growth and the developed world. We're really
bottom up stock investors, so we really concentrate not so much on macroeconomics,
but on companies. And there I think there are always going to be lots of opportunities,
lots of winners and lots of losers as well. And actually as an active stock picker, that's
actually what you want. We don't tend to pay so much attention, frankly, to things like politics,
trade wars. You know, it's interesting to us, the trust as of yesterday,
we pretty much at an all time high in terms of both net asset value and share price.
And, that's despite all the trade tensions the US, China stuff and pandemic. So, if you
can find businesses which can create value, you know you can still make money for your clients.
So, you don't pay attention to politics and trade wars, but I know one thing,
you do pay attention to are ESG factors. So how do you think about that in your investments
and in emerging markets generally? Yeah, that's a great question.
I mean, we've always taken a lot of notice of governance because you couldn't always
take it for granted. Because the longest time, it mattered to us to understand who runs businesses
and controls them, and do they care about shareholder outcomes people like ourselves,
that's the first question, we've always done that. The second thing I think is to say that you know
we have a natural bias towards capital light and probably carbon light industries as well. So,
if you look at the trust's carbon footprint is measured by MCI. It's only something like 4%
of what you would get if you send people the index in a blind way. So, we have a very small carbon
footprint compared to any kind of general asset class exposure and the last thing we've done more
recently is to build a research framework around the most material issues that's really helped us.
First of all, put ESG considerations right at the centre of the way our analysts around
the world think. And secondly it gives us a terrific framework for dialogue and engagement
with businesses. And that's something we do on a weekly basis really going to companies and say
this is where we think you're strong. This is where we think you are weak. And this is what
you could do to improve, and I think that's a big part of responsible investing should be about.
And you say you tried to keep a low carbon footprint in the portfolio. Is that quite
hard? Does that mean screening out a lot of companies because you know a lot of emerging
market countries are quite commodity heavy? Well, we don't explicitly build it into our
research framework, but it's a very natural outcome of the kind of things we're looking for,
so you know we don't like very capital intensive businesses simply because they tend to generate
lower returns on capital because they need a lot of capital. So, we don't have a lot
of investments in areas like commodities. We certainly don't own things like coal mines.
We don't own utilities and power producers, so it's really a natural outcome
of our existing investment biases and the kind of things we're looking for.
Austin, thank you so much for your time. For Morningstar I'm Holly Black.