Running investment trust JP Morgan Global Growth and Income does not come cheap. The asset manager spends around $150million (£136million) a year to find the best firms from around the world to put in its portfolio.
It has almost 90 research analysts worldwide, each with an average of 19 years’ experience. Each one trawls through countless companies to put forward new ideas for the portfolio. They seek high and low: last week the banking team was in Brazil to learn about how new financial players are disrupting the market.
Analysts specialise in a sector and a region and learn it inside out. For example, one analyst is responsible for researching European semi-conductor firms and will know everything about them.
The trust also buys huge data sets to look for new trends and opportunities. For example, the team looks through credit card data to spot structural changes in the way we spend.
JP Morgan Global Growth and Income invests in between 50 and 90 companies – it currently holds 60. Its three managers, Timothy Woodhouse, Helge Skibeli and Rajesh Tanna, are free to invest in any sector and anywhere in the world. The strategy seems to be working. A £1,000 investment three years ago would be worth £1,373 today, which is considerably higher than for other, similar trusts. It also aims to pay out a reliable dividend, worth at least four per cent of the value of its assets, from a combination of the dividends paid out by the companies it invests in and the growth in their value.
Woodhouse believes this strategy has many benefits for investors. ‘The trust pays a reliable dividend, so investors know every quarter what they will receive,’ he says. ‘The trust experiences comparatively low volatility because we invest in a diversified group of companies.’
Its gross assets currently total £1.6billion, putting it among the 350 biggest 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 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 believes is a ‘slam dunk’ of an investment. ‘Amazon has not been posting the profits that it could because it is continually reinvesting,’ he says. ‘It is investing to improve delivery times, which will increase customer numbers and how much customers spend. Its huge investment also means it will be hard for rivals to compete.’
Woodhouse believe Woodhouse believes that within three years, Amazon will have the ability to generate a massive $100billion in free cashflow every year. The fund managers prefer to make their investment decisions based on the companies they believe are well placed to grow over the long term, rather than betting on short-term trends and effects.
At the start of summer, they bought into agricultural equipment maker John Deere – recently renamed Deere & Co. ‘Who knows what will happen to food crop prices and farmers’ balance sheets in the next 12 months,’ says Woodhouse. ‘But Deere is investing in technology that will change farming over the long term.’ That technology could show, for example, where to plant seeds in a field to maximise yield, or where water is most needed.
The trust’s stock market ID code is BYMKY69 and its ticker JGGI. Annual charges total 0.53 per cent. Shares in the trust currently trade at a discount to net asset value of 4.3 per cent.