JP MORGAN GLOBAL GROWTH & INCOME: Hard graft pays dividends

Running investment trust JP Morgan Global Growth and Income is not cheap. The asset manager spends approximately $150 million (£136 million) a year to find the best companies from around the world to place in its portfolio.

It has nearly 90 research analysts worldwide, each with an average of 19 years of experience. One by one, she traverses countless companies to bring forward new ideas for the portfolio. They search high and low: Last week the banking team was in Brazil to learn how new financial players are disrupting the market.

Analysts specialize in a sector and a region and learn from the inside out. For example, one analyst is responsible for researching European semiconductor companies and knows all about it.

The trust also buys huge data sets to look for new trends and opportunities. For example, the team looks through credit card data to discover structural changes in the way we spend.

JP Morgan Global Growth and Income invests in between 50 and 90 companies – it currently has 60. Its three managers, Timothy Woodhouse, Helge Skibeli and Rajesh Tanna, are free to invest in any sector, anywhere in the world. The strategy seems to be working. An investment of £1,000 three years ago would be worth £1,373 today, which is significantly higher than for other similar trusts. It also aims to pay a reliable dividend, worth at least four percent of the value of its assets, from a combination of the dividends paid by the companies in which it invests and the growth in their value.

Woodhouse believes that this strategy offers many benefits to investors. “The trust pays a reliable dividend so investors know what they will receive every quarter,” he says. ‘The trust has relatively low volatility because we invest in a diversified group of companies.’

Its gross assets currently stand at £1.6 billion, making it one of the 350 largest companies listed on the London Stock Exchange.

Its size grew dramatically at the beginning of the month when it merged with Scottish Investment Trust. Both funds were founded in 1887, but while JP Morgan Global Growth and Income has strengthened in recent years, Scottish Investment Trust had a period of low performance and was looking for better options.

The combined fund’s largest holding is currently online retailer Amazon, which Woodhouse says is a “slam dunk” of an investment. “Amazon hasn’t made the profits it could because it’s constantly reinvesting,” he says. “Investments are being made to improve delivery times, increasing the number of customers and how much customers spend. The huge investment also makes it difficult for rivals to compete.’

Woodhouse believes Woodhouse believes Amazon will be able to generate a massive $100 billion in free cash flow every year within three years. The fund managers prefer to make their investment decisions based on the companies they believe are well placed for long-term growth, rather than betting on short-term trends and securities.

At the beginning of the summer, they bought John Deere, a farm equipment manufacturer – recently renamed Deere & Co. “Who knows what will happen to food crop prices and farmers’ balance sheets in the next 12 months,” Woodhouse said. “But Deere is investing in technology that will change agriculture in the long run.” That technology can show, for example, where to plant seeds in a field to maximize yield, or where water is most needed.

The trust’s exchange ID code is BYMKY69 and the ticker is JGGI. The annual cost is 0.53 percent. Shares in the trust are currently trading at a discount to net asset value of 4.3 percent.