JPMorgan Global Growth & Income 02 May 2023

JPMorgan Global Growth and Income (LON:JGGI) aims to provide investors with a well-balanced, core global equity investment solution. The trust pays a Dividend equal to 4% of the trust’s NAV at financial year-end which can be topped up using the vast capital reserves if required. The dividend policy affords the managers significant flexibility to invest according to where they see high-quality and attractively valued opportunities. This has allowed JGGI to generate the highest returns in the AIC Global Equity Income sector over the past five years (see Performance).

Paying a dividend partly from capital allows the managers to tilt the portfolio towards companies that are exposed to long-term structural growth themes but don’t pay a high dividend. This can exaggerate the portfolio’s beta to the market, however, the managers’ strictly bottom-up focus, high active share, and access to JPMorgan’s global equity analyst team help keep the portfolio diversified by revenue source, and by stylistic and macro exposure.

JGGI has merged with Scottish Investment Trust (SCIN) and JPMorgan Elect (Elect), which has contributed to the growth of assets from £723m to £1.8bn. This has led to JGGI’s promotion to the FTSE 250 Index, and a significant reduction in Charges. The board’s strict Discount control policy has seen JGGI return to trading at a premium, closer to its long-term average.

As we discuss in Management, James Cook recently replaced Rajesh Tanna as co-portfolio manager to work alongside Helge Skibeli and Tim Woodhouse. This has not impacted the long-term investment strategy that targets both capital growth and an attractive dividend yield.

We think JGGI offers an attractive way to generate income from global equities. The flexibility afforded to the managers by the Dividend policy is attractive given the volatility in markets and gives them the ability to run a portfolio with greater growth potential than the typical equity income fund. However, we note that there is some variability in the income on offer as if the NAV falls from year to year, then the dividend will likely be lower too.

In our view, the managers’ bottom-up, stock-specific approach to investing offers a potential source of benchmark-agnostic returns. Given the variability of stylistic biases that have been driving equity market returns over the past couple of years, we think this is a particularly valuable characteristic. Furthermore, we believe the heightened levels of volatility across financial markets make the managers’ unwavering focus on quality, coupled with their more core/balanced approach to Portfolio management, likely to enhance the trust’s consistency of Performance across the market cycle.

Finally, we believe the board’s success in maintaining value and enhancing the liquidity for shareholders through their strict Discount control policy is also an attractive feature. With JGGI once again trading at a premium to NAV, the continued issuance of shares is likely to prove accretive to NAV and provide additional capital for the managers to invest, without the need to increase the Gearing, should they see an opportunity to do so. It should also lead to further reductions in Charges.