Which investment companies were the biggest winners following the US election?

Donald Trump’s election win sparked mixed US market reactions: equities surged on hopes for pro-business policies, while bond yields jumped amid inflation fears. London-listed US-focused funds gained, especially those with Musk-related holdings. The standout was JPMorgan’s Emerging EMEA fund, soaring 18.9%—will the “Trump bounce” last?

By Frank Buhagiar

Stock markets reacted well to Donald Trump’s victory in the US elections. As the graph below shows the S&P 500 (blue line), Dow Jones (pink line) and Nasdaq (green line) all spiked higher on 6 November, the day of the results, presumably on hopes that the new administration will raise tariffs, cut taxes and reduce regulations as had been mooted on the campaign trail. The good feeling extended to the rest of the week – all three indices finished up between 5% and 6%.

It was a different story when it came to bond markets however, according to Winterflood US yields surged as Trump’s return stoked inflation fears. “30Y bond yields rose by as much as +24bps (basis points) to 4.68%, the highest since May and the largest one-day rise since March 2020. 10Y yields peaked at 4.47%.”

If the FTSE All Share Closed End Investment Index TR is any indicator then there were signs of a Trump bounce for London’s investment companies too – the index ended 6 November 1% higher compared to the FTSE All Share (flat) and the FTSE 100 (-0.1%).

In terms of sectors, those sensitive to interest rates, such as infrastructure (-0.4%) and property (-2%), fared among the worst, taking their lead from weaker bond markets no doubt. Among the best performers, global (+1.8%) and private equity funds (+3.7%), having material exposure to the US wouldn’t have hurt here. Of course, US funds performed well too, and this is reflected at the individual stock level.

Although having said that, the top-performing fund on the day of the election result does not belong to the North America sector. Instead, it heralds from the emerging markets stable of funds. JPMorgan Emerging Europe, Middle East & Africa (JEMA) put on a vertigo-inducing +18.9% on the day. A quick scan of the news ticker shows the company put out a technical Net Asset Value (NAV) Update showing unaudited NAV per share, including income with debt at fair value, stood at 52.42p as at 5 November 2024. That compares to the previous day’s figure of 52.30p. That 0.12p rise, not enough to explain an 18%+ share price gain on 6 November. Surely, something else afoot. And that something else could well be JEMA’s legacy exposure to Russia.

For the trust was formerly known as JPMorgan Russian Securities. That is until Russia’s invasion of Ukraine and the subsequent economic sanctions posed an existential threat to the fund’s future. The trust re-emerged with a broader investment remit as JEMA, but still holds Russian securities. Problem is, the fund can’t realise these assets. And, according to the company’s 31 October 2024 press release, the investment managers don’t think they will be able to anytime soon, if ever. This followed the expiry of licences held by the fund that “provided for the divestment of certain Russian securities.” The announcement went on to say that because of the expiry “we believe our ability to recover or realise the value of assets has now become even more uncertain.”

The Board however elected not to write-off the value of its Russian assets completely. As Chairman, Eric Sanderson, notes “the Board believes that the intrinsic value of the Company’s Russian assets remains unchanged despite the expiry of the OFAC licences and the provision for valuation of the Russian assets will remain at 99%. The value of the Company’s Russian securities identified in the Company’s half-year report were £1.5 million, representing 7.8% of the Company’s total investments of £19.3 million.”

Fast forward a week to election result day and JEMA’s shares surge higher. Could it be that markets are pricing in the possibility that a Trump victory will increase the chances of the trust recovering at least some value from its Russian assets? With total assets of around £20m, any recovery would make a meaningful difference.

One way to the test the theory is to look at the share price performance of another fund that also holds legacy Russian stocks – Barings Emerging EMEA opportunities (BEMO). Like JEMA, BEMO has written down the value of its Russian assets. But unlike JEMA, BEMO went the whole hog with a 100% write down. That’s despite managing to exit three companies during the latest half-year period for approximately £2.3m. As BEMO’s Half-year Report notes “While these are positive developments, the Board will continue to value the remaining assets at zero until circumstances permit otherwise. Consequently, there is no exposure to Russia in the Company’s NAV, and management fees are not being charged on these assets.”

It follows then that BEMO stands to benefit if a Trump victory leads to some sort of positive resolution regarding its Russian securities, shares closed at 602.5p on 6 November compared to 587.5p the day before. Nothing on the scale of JEMA, but then again, BEMO is a much larger trust with total assets of around £90m. And BEMO’s +2.5% share price gain easily beat the MSCI Emerging Markets Index which finished the day down 0.6%.

Schiehallion (MNTN), another fund not belonging to a US-focused sector that saw a share price surge on the back of Trump’s victory – shares in the growth capital investor spiked +8% higher. Now MNTN might not be classified as a US fund but it could well be because, as at 30 September, 56% of the fund’s total assets were invested in US businesses. That’s not all. Its top holding is none other than Elon Musk’s Space X – 8.3% of total assets as at end of September. Musk, of course, a high-profile backer of Trump during the campaign and appointed efficiency Tsar by the President-elect post-election. Friends in high places and all that.

It’s a similar story with MNTN’s stablemate Baillie Gifford US Growth (USA) – shares closed up +5.7% on 6 November. Besides the obvious US focus, USA, like MNTN, holds Musk’s Space X (3.8% of total assets as at end of July 2024). It also had a further 3.2% invested in Tesla, Musk’s Electric Vehicle mega stock. Tesla’s public listing provides a gauge of just how value-adding Trump’s victory has already been for Musk’s companies. Shares in the trillion-dollar stock were up +44% in the week following the election. Market clearly thinks a Trump victory is good news for Musk and his companies.

Final mention in despatches goes to JPMorgan US Smaller Companies (JUSC), the shares of which added +6.6% gain on the day. No real surprise here. Smaller companies arguably stand to benefit more from tax cuts, lower regulations and US tariffs on overseas competitors. And this was reflected in the performance of the Russell 2000. The US small-cap index finished the week ended Friday 8 November up +8.6%, ‘Trumping’ the larger-cap US indices.

So, there you have it. US funds, as you’d expect, featuring strongly among the top investment company performers on the day of the election result. But so too funds not overtly US-focused. Those like MNTN from the growth capital sector with its sizeable stake in Musk’s Space X. And those like JEMA and BEMO from emerging markets with heavily written down legacy Russian holdings that may just have some value left after all. Both obvious and non-obvious winners in London’s investment company space then. Question is, will the Trump bounce prove to have legs for US-focused funds, Musk companies and holders of legacy-Russian assets alike?