Three voices, one aim... to grow income

INVESTMENT trust JP Morgan Global Growth & Income does things a little differently to most of its competitors.

For a start, it is managed out of both New York and London by three fund managers. It has quite a rigid dividend policy that is determined by the board just prior to the start of the trust’s financial year and which allows shareholders to know the size of quarterly dividend payments they can expect to receive over the next 12 months.

Also, JP Morgan charges a performance fee that means the better job they do running the trust’s portfolio, the higher returns investors should get – although they will also face higher fees.

So far, the trust’s peculiarities have served shareholders rather well. Over the past five years, the trust has comfortably outperformed its peer group, with a return of 108 per cent (compared with an average return for global equity income funds of 69 per cent).

On the dividend front, the current quarterly dividend payment is set at 3.26p a share, compared with 3.13p last year. This means that unless there is a major deterioration in stock markets in the coming months, shareholders can look forward to three more quarterly payouts of 3.26p. The trust’s shares closed Friday at £3.29, implying an annual dividend yield of 4.0 per cent.

Timothy Woodhouse is one of the two managers who works on the trust out of JP Morgan’s

New York offices. He says the three pairs of hands on the trust’s tiller works well. ‘As a trust with a global mandate, we have a lot of ground to cover,’ he says. ‘A lot of companies and analysts come through New York and London and it means we have someone there to see them.’

Although the three managers – Helge Skibeli (New York), Rajesh Tanna (London) and Woodhouse – try to reach consensual decisions on key buy and sell decisions, it is the seasoned Skibeli (29 years at JP Morgan) who has the final vote.

Despite the income bent, the trust’s 71-strong portfolio is not dominated by traditional income stocks. Indeed, many of its top ten holdings are growth companies – the likes of Alphabet and Amazon – that do not pay shareholders a dividend.

Woodhouse says: ‘We’re not interested in companies that are paying a high dividend if we believe such payouts are unsustainable. We would much rather focus on companies that are operating in growth industries, have good cash flow, allocate capital sensibly – and through robust business models have a good chance of thriving long term.’

Such an approach means the trust has no exposure to US telecoms companies as a result of the team’s view that current dividends are unlikely to be maintained, especially if the US economy stumbles into recession. It also has no stakes in tobacco stocks because of the possibility – however thin – of a cigarette sales ban in the US at some stage. Taiwan Semiconductor Manufacturing is a recent purchase for the trust. Woodhouse says: ‘It’s innovative, continues to grow its revenues and it rewards shareholders with dividends. It ticks all our boxes.’

A stock jettisoned earlier this year was US home improvement retailer The Home Depot – not because of any concerns about the quality of the company, but more to do with the negative impact a recession could have on its share price. ‘It’s been a wonderful company for us,’ says Woodhouse, ‘but sometimes you have to be disciplined, take your profits and just move on.’