Results analysis from Kepler Trust Intelligence

RNS Number : 9542O

JPMorgan European Grwth & Inc PLC

15 June 2022

 

JPMorgan European Growth & Income (JEGI)

15/06/2022

Results analysis from Kepler Trust Intelligence

JPMorgan European Growth & Income (JEGI) has released its financial results for the year ending 31/03/2022. In an extremely volatile period for markets, the trust's managers were able to deliver NAV total returns of 7.5% and share price total returns of 9.8%. This was well ahead of the 5.5% returns that JEGI's benchmark, the MSCI Europe ex UK Index, produced in sterling terms over the period.

Shareholders approved several major changes to JEGI's structure towards the end of the period, which could prove beneficial to existing shareholders and make the trust more attractive to prospective investors. Most notably, the trust now has a single share class - as opposed to two - with net assets close to £450m at the end of May 2022. This is intended to improve liquidity in the trust's shares and may help to limit the discount at which the trust may occasionally trade. 

Substantial changes have also been made with regard to the income component of the trust. JEGI will now pay a dividend equal to 4% of NAV at the end of its financial reporting period. Dividends will be paid out on a quarterly basis in July, October, January, and March. The trust will make full use of its structure as an investment company and pay dividends from capital if required, allowing the managers to focus on investing in companies they believe are likely to deliver optimal returns for shareholders.

Kepler View

JPMorgan European Growth & Income (JEGI) has always provided investors with an opportunity to get core, long-term exposure to European businesses and this continues to be the case today. However, we believe the changes that the board made at the start of 2022 - towards the end of the trust's last financial year - make it a much more robust offering for existing shareholders and prospective investors. Lower fees and a substantially larger asset base may help to improve liquidity, attract investment from investors who need greater liquidity, and potentially reduce the discount at which the trust may trade.

The new dividend policy also means JEGI is making full use of its structure as an investment trust, with the ability to pay dividends from capital where needed. We believe this is a much-improved solution for shareholders and prospective investors, who previously had to choose between two separate share classes. It also means the fund managers are freer to focus on picking the best companies to deliver optimal returns for shareholders, rather than factoring the need for income into the investment process.

While previous investors in JEGI's growth share class will benefit from increased demand for a more attractive structure, we believe that it is income investors who may see the biggest advantages from the new structure. By no longer restricting the manager to higher yielding stocks, JEGI can offer income investors a seldom found stylistic exposure, with the capacity to invest in low-yielding, higher-growth stocks, without sacrificing JEGI's yield, offering what we believe are clear advantages through both higher potential total returns, and the ability to offer enhanced diversification potential to more conventional income strategies.

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