Why JPMorgan Claverhouse offers the best of British in an uncertain world
The recent sell off in the UK stock market has created a host of opportunities for JPMorgan Claverhouse. Co-manager, William Meadon believes that there are now many UK companies offering growth in both income and capital for the long term investor.
FTSE falls, finding income and delivering dividends
For weeks the headlines screamed gravity-defying FTSE falls, even more stunning to investors cosseted by the seemingly everlasting upward curve of a decade-long bull market. Suddenly the outlook looked rather less bullish. So is this really the time to invest in companies listed on the London Stock Exchange? Despite the current market downturn, despite uncertainty over the future, the present could in fact be the perfect time to consider buying ‘British’.
At a time when finding short-term returns is a challenge, with its long-term thinking, now is the time when JPMorgan Claverhouse comes into its own. It has proved itself over the decades. While of course investors should be aware that dividends are not guaranteed, and that past performance is not a reliable indicator of current and future results, JPMorgan Claverhouse has returned growing dividends to its shareholders every year since 1963. That’s 47 consecutive years. Prudent reserve management (as well as strong stock selection) means the trust has built up strong dividend reserves, enabling it deliver sustained returns - even in leaner years.
With a portfolio focused on the largest companies by market cap listed on the London Stock Exchange, JPMorgan Claverhouse is resolutely British. With 84% of its portfolio on the FTSE100, it’s more invested in that large cap index than most competitor funds. But in case you’re wondering, ‘isn’t it a risk, in a time of downturn, to be so UK, so FTSE-focused, rather than diversified across a range of markets?’ Claverhouse fund manager William Meadon explains: “Well, in reality, the UK stock market is the most global of developed market indexes, providing investors with huge international exposure.” For example, as at December 31 2019, the UK only accounted for 29% of the FTSE All-Share’s revenue split. “We’re proud that Claverhouse features UK companies with a global footprint,” adds William. It is to the benefit of UK investors that huge international conglomerates such as GlaxoSmithKline, AstraZeneca and Rio Tinto are quoted on the UK stock market.
Short-term gains, long-term thinking
JPMorgan Claverhouse’s portfolio is also diversified across a broad range of sectors, geographies and product bases. William adds: ‘Its holdings are profitable, resilient companies that the team believes will be around in five, 10 years’ time, come what may. The team believes that they’ll deliver in the long-term.’
This means that investors can essentially buy appealing global equities at what the investment team believes really are reduced prices. ‘The UK equity market tends to trade at a discount, and now we are at a 30-year relative low, well below the average discount. UK equities look undervalued compared to other asset classes such bonds, and overseas markets such as the US,’ explains William.
Gearing up for the rebound
Not only does JPMorgan Claverhouse offer the advantages of holding large, income-generating UK companies, it also has the added benefits of corporate governance and high regulatory standards that are an attraction of any UK investment. Today, thanks to the trust’s attractive value, and because we are cautiously optimistic on the longer-term outlook for UK equities, we believe this is a particularly interesting time to consider JPMorgan Claverhouse as an option for your portfolio.
But also looking ahead to when the market does start to pick up again, the trust can ‘gear up’ the portfolio – that is borrow money (cheaply) to double-down on investment opportunities, and thus give investors greater exposure to the market as values rebound.
Global exposure, British assurance
Perhaps there’s something essentially British in JPMorgan Claverhouse’s cautious optimism in challenging times? The team is looking beyond current market conditions to medium and long-term horizons. Being in the right place will enable investors to potentially benefit from market upturn when it comes. With its blend of global exposure and British assurance, that place could be JPMorgan Claverhouse.
It may be challenging for investors to think in terms of upturns and rebounds. However, the strength of this great British portfolio, the strength of the trust’s long-term strategy, and the strength of the J.P. Morgan dedicated team, ensure that JPMorgan Claverhouse is in a strong position to ride out market uncertainty. It could offer an opportunity for investors to buy into a brighter future.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields is not a reliable indicator of current and future results.
J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority, Registered in England No. 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.