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Fund Profile

JPMorgan European Income 07 October 2019


Disclosure – Non-substantive Research

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

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The JPMorgan European Investment Trust Income (JETI) offers a highly diversified portfolio of European equities, boasting the highest yield for investors in the AIC Europe sector, at 4.2%.

The trust is managed by a team of four managers – Stephen Macklow-Smith, Alexander Fitzalan Howard , Michael Baraos and Thomas Buckingham – who look for long-term winners with attractive yields. This involves looking at balance sheets, cashflow, dividend cover and in particular positive earnings revisions which in the managers' view are a key catalyst for performance.

The trust has a decent long-term track record as we discuss in the performance tab, although they have struggled to outperform peers in recent times. This has largely been due to the value orientated style the team have, along with their high exposure to cyclical stocks. With this said, the team has continued to deliver strong dividends, and the company’s capacity to switch its capital reserves for the revenue reserves of the growth share class should help maintain the dividend.

JETI currently stands on a discount of 11.3%, the third widest in the AIC Europe sector.

Kepler View

JETI looks like little else in the AIC European sector. The only company to be yielding over 4%, the trust is unique in its yield driven investment approach and its highly diversified portfolio. Few trusts have more holdings (254), and the top ten positions make up under 20% of the portfolio’s NAV. This could be an attractive quality for UK Equity Income investors (where yields tend to come from a few big names in the FTSE 100) and an interesting way to diversify income.

Admittedly NAV total returns for the trust have been less than impressive in recent times, largely due to the value bias the trust has and the lack of exposure to the high growth stocks that have driven market returns over the past few years. However, in the current conditions we don’t see having an eye on valuations as a bad thing and given the trust’s large discount, attractive yield and capacity to switch its capital reserves for the revenue reserves of the growth share class (in order to grow its dividend) we believe now could be an attractive entry point.

bull bear
Strong yield and history of dividend growth Expensive charges
Well-diversified portfolio Struggles to keep up with peers in growth markets
Wide discount
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2024 Kepler Income & Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for income & growth... Find out more

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