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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.
- Today JGGI released its interim results for the period ending 31 December 2020. Over the six months the trust delivered NAV total returns of 15.4%, while the price total return to shareholders including dividends reinvested was 17.1%. This compares favourably relative to the benchmark MSCI World All Countries Index which rose by 12.1%.
- At the current share price (05/03/21) JGGI yields 3.4%, and two quarterly dividends were paid during the period equating to 6.58p. The board anticipates a full year dividend of 13.16p, which is nearly 1% higher relative to the previous year.
- The managers believe we are at the start of a new market cycle. As such, they have taken up the levels of gearing, reflecting their confidence in the economic recovery. They believe that the recovery is not a short-term event and will take multiple years, however they are positive on the outlook and have reflected this in their portfolio positioning.
Kepler View
JPMorgan Global Growth & Income (JGGI) has delivered another strong set of results for investors, demonstrating the managers’ ability to outperform the benchmark. In NAV terms The trust has now outperformed its benchmark by a margin of 1.5%, 6.6% and 1.9% over one year, five years and ten years respectively.
Looking ahead, while mass vaccinations will take time, and there is the possibility of complications, the return to some level of normality should result in a global economic recovery and significant uptick in corporate earnings. JGGI stands to benefit from this, with the managers shifting the portfolio away from stocks that have done particularly well in the pandemic and towards cyclical companies that should benefit from an economic rebound. As such, industrials and consumer cyclicals continue to be the sectors where the managers have the largest overweight positions relative to their benchmark, while they have added exposure to financials.
JGGI’s income is directly tied to its NAV growth which is paid out in part from capital with a target pay-out of 4% of NAV as at the previous financial year-end. This allows JGGI to offer a different risk/return profile to that of its peers, freed from the more typical high-income names. Currently JGGI’s portfolio has more than 60% of its holdings in the US, as such it is one of the few routes to an income from this comparatively low-yielding region thanks to JGGI’s dividend policy. This makes it an attractive means of diversification for an income portfolio while still providing a current yield of 3.3%. There is also the prospect of a higher dividend for 2021/22, dependent on the NAV level at year end, according to the managers.
The managers will continue to focus on their strengths in the year ahead, which involves identifying structural trends, thinking long term, and finding great companies in which to invest. In their report the managers stated that “Equities remain a great place to be, and we have never been more convinced of the merits of investing globally”. The trust currently (05/03/21) trades at a premium of 2.6%, which could make some investors wary, but given the potential it has to benefit from a global recovery, its strong track record, and the diversification benefits it offers to income investors, we see this as amply justified.
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