Fund Profile

JPMorgan European Growth & Income 12 September 2023

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan European Growth & Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
JEGI: performing well even as investors remain underweight European equities...
Overview

JPMorgan European Growth & Income (JEGI) provides investors with an active large-cap European equity portfolio that can be considered as a core holding. The trust historically had two share classes separately targetting growth and income strategies, but was consolidated to a single share class in 2021, marrying the growth strategy with dividends paid using a mixture of current revenue, revenue reserves and capital. Over the last five years, JEGI has outperformed its benchmark and peer group both in NAV and share price terms and, as we discuss in the Portfolio section, the team have been using price weakness as an opportunity to build active sector positions in semiconductor stocks, rotating out of energy stocks that helped drive performance in 2022.

This is the second year of JEGI’s new dividend policy, with 4% of the financial year’s opening NAV paid in quarterly instalments. Tracking the rise in the NAV over the year, the dividend was increased by 5% for the year ending 31/03/2024 to a prospective 4.2p, which equates to a 4.5% yield at the current share price.

JEGI is managed by the team of Alexander Fitzalan Howard, Zenah Shuhaiber and Timothy Lewis, all of whom have spent their entire careers at JPMorgan: Alexander for over 37 years, Zenah for 18 and Timothy for ten. JPMorgan, overall, has more than 380 investment professionals, so the team can call on extensive resources across a broad range of topics.

JEGI trades on a c. 12% discount and, although the discount has not narrowed in absolute terms since JEGI’s reconstruction, as we discuss in the Dividend section, the discount has narrowed relative to the peer group against a backdrop of generally widening discounts. JEGI’s board continues to buy shares back while the discount remains wider than 10%, and shareholders also have a 25% performance-related tender offer mechanism as a final backstop.

Analyst's View

If one had been told in 2021 that there would be a spike in inflation accompanied by a significant hike in interest rates, along with a hot war in Europe involving a nuclear state, then selling European equities would have been an obvious move - and that’s exactly what happened in 2022. Last year seems likely to remain as a reference year for market analysis for years to come, joining 2000, 2008 and 2020 from this century. Fast-forward to 2023 and, perhaps unnoticed, JEGI and its corresponding equity markets have been moving higher. Does that mean we’ve missed the rally?

As we discuss in the Performance section, this rise in markets has not been matched with a rise in investor sentiment, as measured by looking at European equity fund flows. After one of the largest net outflows ever seen in 2022, this year investors have been sitting on the sidelines even as markets have moved higher. This says to us that if the good operating results that JEGI is seeing across its portfolio continue, there is plenty of latent demand for European equities. JEGI is a core European equity mandate and, married to that, it pays a predetermined dividend that potentially gives it a role in any income portfolio.

Bull

  • Core European equity trust with a track record of outperformance
  • Latent potential for inflows into European equities from underweight global investors
  • Dividend policy provides income-seekers with an income portfolio diversifier

Bear

  • A mixed picture for European economies may hold equity markets back
  • Dividend is not progressive, but rises and falls with the NAV
  • Gearing can amplify losses as well as gains
Continue to Portfolio
2024 Kepler Income & Growth Rated Fund

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

Fund History

15 May 2024 Why'd you have to go and make things so complicated?
European growth may be more complicated, and positive, than we suspected...
17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
12 Sep 2023 Fund Analysis
JEGI: performing well even as investors remain underweight European equities...
21 Jun 2023 Ça plane pour moi
Some of the world's biggest companies are doing just fine in Europe, yet investors shun the region. Time for a rethink...
17 Mar 2023 A feast for your ISAs – the second course
Dividends, UK small caps, energy and more…
14 Mar 2023 JPMorgan European Growth & Income - Income and growth without compromise
Zenah Shuhaiber
Rewatch this webinar from our month-long online series 'A feast of ideas for your ISA' hosted by the team at Kepler Trust Intelligence throughout March...
Watch Recording
02 Mar 2023 The Devil’s in the demographics
China’s population is in decline - should it turn east or west for inspiration..?
28 Feb 2023 Fund Analysis
JEGI is a core European equity trust designed for all weathers…
17 Feb 2023 A brighter 2023 for European equities
Companies on the continent may have reason to feel cautiously optimistic…
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
29 Nov 2022 Results analysis: JPMorgan European Growth & Income
JEGI’s new structure offers an attractive combination of income and growth potential…
02 Nov 2022 The stability dividend
Our analysis shows that trusts paying a regular income suffer less discount volatility...
20 Oct 2022 Cold winter, bright future
JEGI is well positioned to benefit from any long-term improvement in Europe’s fortunes…
15 Jun 2022 Staying active
We highlight several alternatives to passive investments for investors looking for core exposure in uncertain markets...
14 Jun 2022 Results analysis: JPMorgan European Growth & Income
Major structural changes will make JEGI an appealing core holding for investors of all stripes…
10 Jun 2022 The devil is in the details
JEGI has made some very favourable changes for shareholders…
08 Apr 2022 Fund Analysis
The newly established JEGI offers investors an attractive combination of a high dividend with a core European equity portfolio…
18 Jun 2020 Gimme shelter
As income investors brace for impact we ask which regions and trusts are less likely to cut their dividends in 2020…
09 Oct 2019 Fund Analysis
One of the only income vehicles across the European universe, JETI offers UK investors a unique way to diversify their income…
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