JPMorgan Global Growth & Income Trust has a diverse global portfolio which seeks to provide superior total returns, in excess of its benchmark the MSCI All Cap World Index. The team are able to leverage JPMorgan’s considerable bank of global equity analysts, looking to create a portfolio of the highest-quality companies which are chosen for their exposure to key structural trends (as discussed in detail in the Portfolio section).
Recently JGGI changed its Dividend policy to one which allows it to pay its dividend from capital. It now targets a payout of 4% of its NAV, valued at its financial year end. As a result, the trust has fewer practical restrictions on how it can invest, being able to purchase high-growth but low-income names that its global equity income peers are typically not invested in. This has led to it having a large overweight to the US versus its peers in the AIC Global Equity Income sector.
Performance has been strong versus its peers. JGGI delivered an 81.4% NAV total return over five years, exceeding the peer group average of 51% and marginally ahead of its benchmark’s 79.7%. We discuss this, and the trust’s strong COVID-19 bounce back, in the Performance section.
Seemingly as a result of the new dividend policy and the strong performance versus its peers, JGGI has largely traded at a premium since 2017. It has maintained this premium after the initial outbreak of the COVID-19 pandemic, whilst most of its peers have traded at a discount.
It is our belief that JGGI offers something refreshing within the global equity income space. We view the ability to pay its dividend through capital as being key for JGGI, freeing it from the more typical high-income names. Not only does this allow it to invest in higher-performing sectors, but it also makes the trust attractive for diversifying an income portfolio.
One of the few ways an income investor can invest in the US while generating competitive yields is through trusts, such as JGGI, which can be creative with their dividends. The sacrifice an investor must make for this is the absence of a guarantee of a progressive dividend. That having been said, it is out opinion that the risk of a more volatile dividend stream is more than made up for by the superior total returns JGGI has demonstrated.
This is, we believe, reflected in JGGI’s current premium. While buying a trust at a premium may be off-putting for some investors, we believe the payoff to be reasonable. This has certainly been the case during the COVID-19 pandemic, where we view the the trust’s investment flexibility as allowing it to come out on top, and it is one of the few positive performers in its peer group. So long as JGGI’s investment process and dividend policy continue to offer advantages, we believe its premium will be justified.
|Ability to pay dividend out of capital allows for flexibility in investing||Dividend growth cannot be guarenteed|
|Diversifies away from the more traditional equity income allocation||Relatively short tenure of management team for the trust|
|Outperformance versus peers since the COVID-19 crash||More highly rated portfolio may underperform peers in a possible post-COVID value rally|