People, process and performance are at the heart of JP Morgan's Europe Dynamic Long Short Fund. Closed until relatively recently, JP Morgan has decided to open it again to investors. The fund, run by Jon Ingram, Jon Baker and Anis Lahlou-Abid, has achieved a cumulative annualised return of 18.9% since its launch in October 2003. The philosophy that Ingram says led to the success of the fund is based on targeting on average, fast growing cheap stocks with good news flow, outperforming the slow growing expensive stocks. "It is a common sense approach," says Ingram. He agrees with the ideas behind behavioural finance, the study of how humans interact in financial services. The underlying cause of the anomalies in the market, believes Ingram, can be attributed to this. First, people are overconfident, generally believing their own views above anyone else. This leads to valuation anomalies. With loss aversion there is a reluctance to stop a loss and a greater tendency to sell the winners. This can lead to anomalies in momentum investing. The third characteristic Ingram thinks informs human behaviour is what he calls "anchoring" akin for feeling comfortable in a crowd. So brokers tend to anchor and extrapolate, leading to a deviation in estimate revisions. Since people will not change, market anomalies will not disappear. The fund looks to correct this worldview through a stock selection process that is "clear and consistent". From the total investment universe created after a tight analysis, an initial evaluation looking at value, growth, price momentum and earnings revisions are undertaken. This is followed by a qualitative analysis looking at valuation, news flow, an analysis of the balance sheet and liquidity and data validation. Finally the stocks are ranked for their ability to produce alpha." A qualitative analysis is the common sense approach," he says. From this process the fund usually targets around 100 stocks on both the long and short sides....
Start a FREE trial or subscribe to continue reading:
Start a 4 week free trial
Try Risk.net's premium content for a limited period. Register now for your FREE trial to one of our leading brands.
*not available to previous trialists or subscribers.
Log In or Subscribe Now
Subscribe to Risk.net Business now to access all our premium news & features content for 1 year.
Pay by Credit Card for immediate access.