JPMorgan Global Growth & Income 29 September 2023
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by JPMorgan Global 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.
JPMorgan Global Growth and Income (JGGI) aims to provide investors with a high-conviction, benchmark-agnostic portfolio capable of delivering strong total returns across the market cycle. As discussed in Performance, the managers’ stock-specific, bottom-up approach to investing has generated alpha over the short and long term, outperforming the MSCI ACWI by 25% and 5.2% over five years and 12 months respectively, as at 26/09/2023.
JGGI is managed by Helge Skibeli, Tim Woodhouse, and James Cook. As discussed in Portfolio, they have the luxury of being able to access the breadth and depth of JPMorgan’s internationally diverse research engine across global equities. The strategy has historically had a growth tilt which has enhanced the trust’s ability to generate capital growth. The dividend policy gives the managers the freedom to invest this way as it allows the board to pay dividends from capital. The policy is to pay out an annual dividend of 4% of the financial year-end NAV (see Dividend).
However, the elevated levels of uncertainty and volatility in the markets over the last couple of years have led the managers to take a more balanced approach to portfolio management with the aim of neutralising the trust’s beta and dampening the trust growth style exposure to markets. This is also reflected in the managers’ more cautious approach to Gearing.
The mergers with Scottish Investment Trust (SCIN) and JPMorgan Elect in 2022, led to significant growth in the trust’s net assets. This has reduced Charges and the trust now trades at a premium of 1.8%, in line with its five-year average of 1.8% (see Discount).
In our view, the managers’ investment strategy has demonstrated its long-term value through JGGI’s very strong relative and absolute Performance. What is particularly impressive is the trust’s consistency of alpha generation across periods when markets have been driven by different stylistic biases. This demonstrates the success of the managers’ focus on individual stock selection, and their efforts to deliver a more core/stylistically-balanced approach to Portfolio management. In our view, this should make the trust appealing to a long-term investor.
JGGI’s strong performance has been aided by the dividend policy. The ability to finance the dividend through revenue and capital affords the managers the flexibility to invest across growthier companies. We believe this is an attractive feature. Interest rates look to be close to a peak, and should we see rate cuts we would expect that to benefit growthier companies/strategies. However, it is important to note that such a structure can also result in some dividend volatility – particularly if we experience a broader market selloff.
We think the premium rating is well deserved given JGGI’s strong long-term track record of performance and the combination of income and growth it offers. Post-merger, the trust is more liquid and should enjoy a reduction in Charges which will only continue should the trust continue to grow.
- Strong consistency of performance over a prolonged period of volatile market conditions
- Ability to pay dividends from capital allows for a more flexible investment strategy compared to income-focussed peers
- Merging of assets has reduced charges
- Dividend cannot be guaranteed to be progressive
- Ability to invest in growthier markets leads to higher volatility of returns compared to the peer group
- Currently trading at a premium to NAV, which may exaggerate losses if the premium falls