HEAD-TO-HEAD: Invesco vs JP Morgan

Added 16th October 2015

FSA compares two funds focused on South Korea as the country hits economic headwinds.

HEAD-TO-HEAD: Invesco vs JP Morgan

Data from South Korea's Ministry of Employment and Labour released in early October shows that the youth unemployment rate has hit 10%, with 1.1 million young people struggling to find jobs.

The country’s industrial sector is also being hard hit by China’s slowdown, and South Korea's finance minister said shipbuilders, steelmakers, shipping companies and the petrochemical and construction industries need urgent reforms.

The Korea Economic Research Institute recently cut its growth outlook for this year to 2.4%, from an earlier forecast of 2.7%. Similarly, HSBC revised its outlook down to 2.4%, from an earlier projection of 2.8%.

Against this backdrop of sluggish growth and surplus production, Fund Selector Asia compares the Invesco Korean Equity Fund against the JP Morgan Korea Fund. Both invest primarily in companies whose shares are traded on the Korea Stock Exchange.

Luke Ng, senior vice president at FE Advisory Asia, has provided a comparative analysis.

Investment strategy review

While both funds use the Korea Composite Stock Price Index (KOSPI) as their benchmark, they have significantly different investment strategies.

The Invesco fund, led by Simon Jeong, focuses on companies with a competitive edge backed by strong management. Predictable earnings growth and the availability of cash flow are factors that Jeong favours. These companies are referred to as “core quality” businesses. They make up 70%- 80% of the fund’s holdings and are typically held for the long term.

Jeong invests the remaining 20%-30% in higher dividend, deep value and quality cyclical stocks. 

The Invesco fund is currently leaning heavily toward the consumer and mid-cap segments. Jeong typically maintains a concentrated portfolio of 25-30 holdings.

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