LONDON: J.P. Morgan Asset Management launches JPMorgan Senior Secured Loan Fund investment company
Nov 19, 2013
New UK-listed closed-ended fund focusing mainly on senior loans market
Portfolio to target investment in mainly US and Canadian assets with a primary objective of a high level of income
Demand for floating-rate loans as an asset class is high and set to increase, predicts J.P. Morgan Asset Management
J.P. Morgan Asset Management, the largest manager of investment trusts in the UK, announces the launch of JPMorgan Senior Secured Loan Fund Limited ('the company') by way of a placing and an offer for subscription. The placing and offer, which opened on Monday 18 November, will close on 2 December 2013. It is expected that the shares will begin trading on 9 December 2013.
The launch will be the second new UK closed-ended fund managed by J.P. Morgan Asset Management this year, building on its most successful IPO to date, JPMorgan Global Convertibles Income Fund, which raised £136m in June. The JPMorgan Senior Secured Loan Fund is targeting assets of at least £100m at launch. At launch, the company is principally targeting wealth managers, funds of funds and institutional investors.
The Guernsey-domiciled closed-ended investment company will give investors access to a broadly diversified portfolio of floating-rate debt instruments, at least 80% of which will be senior secured loans, targeting an initial dividend of 5p in respect of the company's first financial period, with some secondary potential for long-term capital growth. The majority of assets (a minimum of 80%) will be in US or Canadian investments, and the portfolio will be hedged back to sterling.
Because senior loans are floating-rate instruments, they provide a level of protection in a rising interest rate environment that may not be available from bonds, where coupons are typically fixed, and enable investors potentially to attain relatively high rates of current income. Loans are usually secured by a security package over a substantial proportion of the borrower's assets, often ranking first in priority of payment, and therefore senior to bonds in a company's capital structure. That means they are less sensitive to changes in credit fundamentals and offer a greater level of capital and income security.
The company will be managed by Jim Shanahan and Bill Morgan from J.P. Morgan Asset Management's High Yield team, based in Cincinnati, Ohio. The team manages assets of approximately $38bn (as at 30 September 2013), of which more than $6bn is in senior secured loans. Senior investors in the team have worked together for more than 25 years.
Dividends will be paid half-yearly in the first year, with the intention of moving to quarterly dividend payments thereafter. The company will pay a management fee of 0.75% per annum on the lower of its net asset value or market capitalisation, and the issue price per share will be 100p, with an expected opening net asset value per share of 98.25p. There is a minimum investment of £1,000 under the Offer, with no maximum investment limit. Shares in the company are eligible to be held in an individual savings account (ISA).
Jim Shanahan, senior portfolio manager for the High Yield Group at J.P. Morgan Asset Management, said: "The closed-ended structure of this new fund suits our opportunistic style of fund management, as it will have a stable pool of assets. Often the optimal time to buy senior secured loans is when risk aversion is high, but when risk aversion is high that is also the time that many investors head for the exit. Because it does not have to manage inflows and outflows, the closed-ended structure is a better vehicle to take advantage of market dislocations."
Shanahan continued: "The loans market today is giving us good credit quality and reasonable yield. We do not think that in the current policy environment we need to go very defensive. At present we are focused on mid-range credits rated B, where yields are in the 4-7% range."
Simon Crinage, Head of Investment Trusts at J.P. Morgan Asset Management, added: "We are very excited about this launch, which we see as answering significant demand for floating-rate assets of this type as investors begin to focus on the prospect of rising interest rates at some point in the coming months or years. The UK market is under-served by funds investing in senior secured loans, in part because the UCITS rules do not permit loans to be held in the portfolios of UCITS-qualifying funds. As the largest manager of closed-ended funds in the UK, and a major player in the loans market through our highly experienced High Yield Team, we look forward to helping UK investors to broaden their exposure to this market."
Full details of the investment company (including the Prospectus) will shortly be available at:
For further information please contact:
Sarah Godfrey: Media Relations
Telephone: 020 7742 5950
Telephone: 020 7294 3689
Notes to Editors
About J.P. Morgan Asset Management
J.P. Morgan Asset Management is part of JPMorgan Chase & Co. and is a global asset management leader providing world-class investment solutions to clients. With US$1.5 trillion in assets under management (the Asset Management client funds of JPMorgan Chase & Co. as at 30 June 2013) and offices in 41 locations around the world, J.P. Morgan Asset Management offers global coverage with a strong local market presence, and leadership positions in most asset classes.
J.P. Morgan Asset Management is a trading name of J.P. Morgan Asset Management Marketing Limited, which has issued this material in the United Kingdom and which is authorised and regulated by the Financial Conduct Authority. Registered in England No. 288553. Registered office: 25 Bank Street, Canary Wharf, London E14 5JP.
This announcement is not an offer to sell or a solicitation of any offer to buy the securities of JPMorgan Senior Secured Loan Fund Limited (the "Company", and such securities, the "Securities") in the United States, Australia, Canada, South Africa, Japan or in any other jurisdiction where such offer or sale would be unlawful.
The Company has not been and will not be registered under the US Investment Company Act of 1940 (the "Investment Company Act") and, as such, holders of the Securities will not be entitled to the benefits of the Investment Company Act. No offer, sale, resale, pledge, delivery, distribution or transfer of the Securities may be made except under circumstances that will not result in the Company being required to register as an investment company under the Investment Company Act. The Securities have not been and will not be registered under the US Securities Act of 1933 (the "Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered, sold, resold, pledged, taken up, exercised, renounced, delivered, distributed or transferred, directly or indirectly, into or within the United States or to or for the account or benefit of, US persons as defined in Regulation S under the Securities Act ("US Persons") except pursuant to an exemption from or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States and in a manner which would not require the Company to register under the Investment Company Act. No public offering of the Securities is being made in the United States.
This communication is only addressed to, and directed at, persons in member states of the European Economic Area who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive ("Qualified Investors"). For the purposes of this provision, the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each member state of the European Economic Area which has implemented the Prospectus Directive. In addition, in the United Kingdom, this communication is being distributed only to, and is directed only at, Qualified Investors (i) who have professional experience in matters relating to investments who fall within the definition of "investment professional" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order") or (ii) who are high net worth companies, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Order, and (iii) other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons"). Any investment or investment activity to which this communication relates is available only to and will only be engaged in with such persons. This communication must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, by persons who are not Qualified Investors.
This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of information in the prospectus to be published by the Company in due course in connection with the admission of the shares in the capital of the Company to the Official List of the UK Listing Authority and to trading on the London Stock Exchange plc's main market for listed securities (the "Prospectus"). Copies of the Prospectus will, following publication, be available from the Company's registered office.
The target initial gross dividend of 5p should not be taken as an indication of the Company's expected future performance or results over such period. This target dividend is a target only; there is no guarantee that it can or will be achieved and it should not be seen as an indication of the Company's expected or actual return.