JPMorgan Claverhouse 11 December 2024

JPMorgan Claverhouse (JCH) has a new management team behind it, following notification to the Board that William Meadon was leaving JPMorgan in summer 2024. William’s co-manager Callum Abbot has been joined by Anthony Lynch and Katen Patel. Whilst all of them are members of JPMorgan’s UK Equity team, as a group these three individuals have an interesting combination of skills and areas of focus. JCH is now at the centre of the UK equity Venn diagram, with experts across large-cap, mid-cap and small-cap all inputting ideas for its portfolio going forward.

The managers’ focus will remain on delivering both income growth (JCH has an unbroken record of 51 years of dividend increases – see Dividend section) and capital growth for shareholders. The changes to the portfolio the team have made so far are firmly focussed on growing the dividend as much as possible, but remaining true to the desire to grow capital too. As we discuss in the Portfolio section, one of the bigger changes the team have made is to embrace a “genuinely all-cap approach”, adding materially to mid-cap exposure, which in their view has a firm prospect of growing their dividends strongly in the future.

The way the team think about income exposure has also evolved. Previously JCH had a barbell approach, but going forward the team characterise their approach as having three buckets with different yield and growth requirements. Overall, the team believe that this will result in more consistent underlying income across the portfolio, and better underlying growth. The portfolio remains relatively concentrated, with between 60 and 80 high conviction holdings at any one time. This is a pure stock-picking portfolio and with the changes the team has made, the tracking error / active risk has slightly increased.

JCH has long been a stalwart of the UK Equity Income sector, and has delivered an impressive 51 years of dividend increases. The last decade saw William Meadon, subsequently joined by Callum Abbot, continue to deliver for shareholders. With the change in the portfolio management team, a new stage in JCH’s evolution is now upon us, with two experienced managers joining Callum. The changes they have made so far, and the impact these will have on JCH, are likely to be incremental rather than revolutionary in our view. However, as we discuss in the Portfolio section, with expertise across the UK all-cap spectrum now, we believe the team have taken credible initial steps towards securing the dividend growth of the next decade.

The team state that the changes they have made have given the portfolio a more consistent and predictable income, but also better prospects of future dividend growth. Given JCH’s plentiful revenue reserves, the team can afford to take measured risks to set the portfolio on an improved dividend growth trajectory. Time will tell whether these changes will achieve this, but in the meantime JCH’s dividend yield is attractive at 4.9%, backed by the implied determination from a board, with 51 years of dividend growth behind it, to continue to deliver dividend growth into the future. We note that the discount of 6.4% is marginally wider than where the trust has historically traded. If the new team are successful, this will add to JCH’s already strong allure as a dividend hero, and we could see the discount narrow.