The UK economy has been getting a lot of bad press of late, with criticism focused on the economy’s underperformance relative to the US and other developed countries. However, things may not be as grim as the media would have us believe. Recently revised UK GDP data show that contrary to previous figures, GDP has now surpassed its pre-pandemic level, and is growing at a pace comparable to its largest European neighbours. The Composite Purchasing Managers’ Index, which is a more forwarding looking indicator, suggests that UK economic activity, although currently slowing slightly, is running at levels very close to readings for both the US and Europe, while UK government debt, at just over 100% of nominal GDP, not much higher than Eurozone government debt, and well below the US level of almost 120% of GDP.

Yet UK equity valuations are still very low

However, despite such evidence, the perception persists that the UK economy is lagging its peers, and this is almost certainly one reason why UK equities are currently so out of favour with investors at home and abroad, to the extent that the UK market is now the cheapest developed market in the world. The UK market valuation is also low compared to the US and Europe, and individual UK stocks offer great value relative to their US counterparts. For example, oil and gas producer Shell, drinks company Diageo and British American Tobacco are all UK blue chip, mature global businesses, whose revenues are mostly derived from overseas markets. Yet they are trading at knock down prices.

Low valuations won’t last too much longer

Just like the current misconceptions about the UK economy, we believe that these ultra-low valuations won’t linger forever. If history is any guide, domestic and foreign investors should eventually return to the market to snap up bargains. Alternatively, competitors and private equity firms may step up takeover activity, or UK companies may simply increase buy backs of their own shares to increase shareholder returns.

Claverhouse: Targeting the best of British

For investors keen to take advantage of current low UK valuations, before it’s too late, JPMorgan Claverhouse Investment Trust (known by its ticker JCH) offers diversified exposure to great British businesses. The Company’s benchmark is the FTSE All-Share index, but JCH invests mainly in FTSE 100 companies, with a focus on income generating companies that provide consistent and growing dividends. Its managers adopt a ‘barbell’ approach which seeks to strike a balance between growth and value stocks. This approach gives the managers flexibility to adjust the portfolio in response to market developments. It also means the Company’s performance is less volatile than the returns of funds focused solely on value or growth strategies, which can be left stranded when the tide of market favour ebbs.

Delivering consistent outperformance

The merits of this barbell strategy, and the managers’ stock selection skills, are confirmed by JCH’s very consistent long-term performance. Since its current strategy was adopted in March 2012, the Company‘s NAV has realised outright average annual total returns of approximately 8% per annum^*1 and outpaced the benchmark by 0.8% per annum^*2, while its share price has outperformed by 1.5% per annum^*3.

50 years of growing dividends

In addition, JCH has also delivered 50 consecutive years of dividend growth – a claim not many investment companies can make. Since 1972, compound dividend growth has totalled 8.8% per annum, higher than dividend growth of 6% per annum for the UK market, and even further above average UK inflation of 4.9% pa over this period.

JCH’s dividend pay-outs to shareholders are supported by portfolio income from diverse sectors of the UK market, currently led by banks, which are well-capitalised and benefiting from higher interest rates. The Company is committed to maintaining its long record of rising dividends, and the managers are confident about the outlook for dividend payments from portfolio companies. However, JCH has strong revenue reserves, amounting to approximately a year’s worth of dividend payments, which it can draw on to support dividend payments as required.

…and a lower ongoing charge

In sum, JCH offers investors diversified exposure to the many great, but undervalued, companies that comprise the UK market. It’s very strong, and smooth, performance track record should interest those seeking capital gains and shelter from market volatility, while its dividend policy provides a reliable, competitive and rising dividend. And to add to its potential appeal, the Company has just lowered its ongoing charge by 10bp to 45bp on the first £400m of assets under management, with the charge of 40bp thereafter, making it even better value for shareholders.

The JPMorgan Claverhouse Investment Trust plc has been helping investors tap directly into the long-term growth potential of UK large cap stocks since 1963. The trust focuses on attractively valued, high quality stocks with the ability to generate consistent and growing dividends.

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^*1Source: J.P. Morgan Asset Management. Data from 01 March 2012 to 30 June 2023. Net asset value performance data has been calculated on a NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP. Annualised net asset value (NAV) return of the investment trust in excess of the benchmark calculated geometrically. NAV return per share is calculated on a Fair Value basis, in GBP, cum-income NAV (assuming that all dividends paid out during the relevant periods were reinvested into the shares of the investment trust at the NAV per share on ex-dividend date), with borrowings at fair value. Past performance is not a reliable indicator of future results.

^*2Annualised net asset value (NAV) return of the investment trust in excess of the benchmark calculated geometrically. NAV return per share is calculated on a bid value to bid value basis, in GBP, cum-income NAV (assuming that all dividends paid out during the relevant periods were reinvested into the shares of the investment trust at the NAV per share on ex-dividend date), with borrowings at par. Past performance is not a reliable indicator of future results.

^*3Share price performance figures are calculated on a mid market basis in GBP with income reinvested on the ex-dividend date. Benchmark = FTSE All–Share Index. Past performance is not a reliable indicator of future results.

Summary Risk Indicator

The risk indicator assumes you keep the product for 5 year(s). The risk of the product may be significantly higher if held for less than the recommended holding period.

Investment Objective:

The Company aims to provide a combination of capital and income growth from a portfolio consisting mostly of companies listed on the London Stock Exchange. The Company’s portfolio consists typically between 60 and 80 individual equities in which the Manager has high conviction. The Company has the ability to use borrowing to gear the portfolio within the range of 5% net cash to 20% geared in normal market conditions.

Risk Profile :

• Where permitted, a Company may invest in other investment funds that utilise gearing (borrowing) which will exaggerate market movements both up and down.
• This Company may use derivatives for investment purposes or for efficient portfolio management.
• External factors may cause an entire asset class to decline in value. Prices and values of all shares or all bonds and income could decline at the same time, or fluctuate in response to the performance of individual companies and general market conditions.
• This Company may utilise gearing (borrowing) which will exaggerate market movements both up and down.
• This Company may also invest in smaller companies which may increase its risk profile.
• The share price may trade at a discount to the Net Asset Value of the Company.
• The single market in which the Company primarily invests, in this case the UK, may be subject to particular political and economic risks and, as a result, the Company may be more volatile than more broadly diversified companies.

This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that 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. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are not reliable indicators of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. Investment is subject to documentation. The Annual Reports and Financial Statements, AIFMD art. 23 Investor Disclosure Document and PRIIPs Key Information Document can be obtained in English from JPMorgan Funds Limited or at www.jpmam.co.uk/investmenttrust. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.

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