JPMorgan Global Growth & Income aims to provide superior total returns over the long term by investing in companies based around the world which are benefiting the most from key themes in the economy and society.
The themes in the current portfolio include the technological – cloud computing, big data and electric cars – as well as social, for example the growing demand in Asia for financial products and the changing spending habits of millennials.
Since 2018, the board aims to pay out at least 4% of NAV in income each year, based off the NAV at the start of the year and paid in quarterly instalments. This can be paid out of capital, which means the managers, Helge Skibeli, Rajesh Tanna, and Timothy Woodhouse, have not had to change their core, valuation-sensitive approach.
The new dividend policy has seen the trust move to the AIC Global Equity income sector, where it is the second-best performer out of six members over five years in NAV total return terms. Over that period, it has delivered NAV total returns of 81%, compared with the sector average of 55.1%. The MSCI AC World index has returned 80.6% over this time.
The first step of the investment process involves the managers, supported by 81 analysts, creating industry frameworks to determine how companies will respond to structural changes. Next, the team undertakes in-depth analysis looking for companies that are trading at a discount to their forecast intrinsic value which, for the team, is determined by the company’s future cash flow stream. Earnings forecasts are then created over varying time periods and, through understanding a company’s forecast value with the current value of the business, the team is able to create a valuation rankings.
The end result is a diversified portfolio of 81 companies, with the top ten holdings making up just 25% of the portfolio. The industry and geographical exposures are purely a reflection of the managers’ bottom-up stock selection and the research conducted on structural change.
The trust yields 3.7% on a historic basis, but will pay out 4% of the NAV from the start of the 2018 financial year and in future years. Since the introduction of this policy in 2016, the trust has seen a dramatic turnaround in sentiment and, after reaching lows of close to 16% in June of 2016, the trust has spent the past two years consistently trading at a premium to NAV.
JPMorgan Global Growth & Income is an attractive trust for those looking for a relatively predictable income with some capital growth too. The trust is rigorous in its forecast-driven approach and the depth of analysis the team goes into is only possible for a company of JPMorgan’s size.
The change of income policy in 2016 has been the real game changer. The process has shown the ability to generate steady total returns over the long run, but the trust now offers a 4% dividend yield as well. Investors have clearly enjoyed the clarity of the policy of announcing the dividend for the coming year and this has been reflected in the narrowing of the discount. The trust is currently trading at a premium and we see any discount as an attractive entry point for the trust.
|Strong track record for NAV returns
||Trading at a premium|
|Excellent income source for investors since the change in policy in 2016||the income is not "natural", which some may not like|