JPMorgan UK Small Cap Growth & Income (JUGI)

Due to the plethora of undervalued equities at the lower end of the UK market cap spectrum, Georgina Brittain and Katen Patel, managers of JPMorgan UK Small Cap Growth & Income (JUGI), report they are finding numerous opportunities from the bottom up, using a process that looks for quality companies that are seeing positive momentum and trading at attractive valuations (see Portfolio). The managers note that valuations are currently very compelling, especially on their preferred free cash flow metric, with the portfolio now at a near record of 9.5%.

This approach has delivered strong long-term returns. Over the past decade, JUGI has produced annualised NAV returns of over 8%, more than three percentage points above the equivalent benchmark figure, aided by good stock selection. Near-term Performance has also been strong in absolute terms, with returns of over 20% (to 13/04/2026) according to Morningstar. Long-term holding Lion Finance has been a notable contributor to this, with the share price having doubled over 12 months. This has led to its promotion into the FTSE 100 Index, demonstrating how today’s smaller companies can become tomorrow’s large-caps, with the managers now rotating back into a broad range of good value opportunities.

The trust has an enhanced Dividend policy, providing investors with a good and consistent yield, whilst allowing the managers to invest in the best opportunities without being beholden to a yield target. The trust was awarded Kepler’s 2026 Rating for Income as a result of its strong performance. However, the trust’s Discount has reverted back to its five-year average, despite beginning to narrow in early 2026, a pattern that has occurred a few times over the past five years.

In order to best capture the valuation opportunity on offer in the asset class, the managers have a net Gearing level of c. 10%, a level that has been consistent for much of the past five years.