Marketing Communication

For long-term investors, especially those seeking regular income, predictable dividends bring welcome peace of mind. 

These attributes form the cornerstones of The Mercantile Investment Trust’s investment strategy. The trust, which invests in UK small and medium sized companies, is managed by a very experienced investment team and a considered, disciplined investment process, backed by deep and systematic research and prudent risk management.

The Mercantile’s Portfolio Manager, Guy Anderson has more than 20 years’ industry experience, and Anthony Lynch has worked alongside him since 2009. They draw on JPMorgan’s extensive research resources, including a dedicated team focused on the mid and smaller cap sector - an area of the market that needs careful, first-hand scrutiny, as many stocks in this sector are overlooked by other investors.

The team’s rigorous stock selection approach aims to identify the best stocks in the market - high quality, resilient, nimble businesses that possess significant opportunities for growth. All portfolio holdings must satisfy fundamental quantitative criteria to ensure they have sustainable business models capable of generating earnings growth and profits over the long term. Valuations are a further important consideration, and the managers are careful not to overpay for attractive businesses.

It is clear from this process that the managers are not targeting a few, isolated success stories. Every one of the portfolio’s 75 or so holdings is expected to contribute towards strong, long-term returns for shareholders. And if it does not, the position is closed to make room for more reliable performers. This ensures that over time, returns are generated across the portfolio, from a number of stocks, drawn from a variety of sectors.

In addition to the careful selection of a diversified portfolio of stocks, the investment process also has inbuilt risk controls to help to protect performance from unwelcome volatility generated by unanticipated stock specific events, an inevitable risk factor for stock market investors. For example, the size of any one position is capped at 8% of total assets, and there is a further limit on the number of large holdings. A gearing limit of 20% of total assets constrains the managers’ ability to exposure the portfolio to market risk (note that any level of gearing will exaggerate market movements both up and down).

The combination of a rigorous investment process, experience team and JPMorgan’s depth of resources has resulted in the Trust’ NAV outperforming its benchmark over the one-, three-, five- and 10- year periods ended 30 June 25.¹ This amounts to average annualised returns of 6.7% over a ten-year period², well ahead of the average annual benchmark, not that past performance guarantees future results.

The Mercantile’s dividend payment record is also reassuringly competitive. Its annual dividend has been maintained or increased every year since 1992, including during the pandemic, when many companies suspended dividend payments to protect their liquidity. This has been achieved by careful management of the Trust’s income reserves.³

This dividend track record also places The Mercantile in the ranks of the AIC’s next generation of dividend heroes, comprising investment companies which have increased their dividend every year for 10 years or more.⁴

In sum, The Mercantile’s investment strategy and careful risk management mean that investors can be confident that they are in the hands of seasoned professionals aiming to deliver reliable and consistent returns and working on steadily rising dividends over the long term.

¹ JPMorgan Asset Management/Morningstar. Net asset value performance (NAV) data has been calculated on a NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP. Factsheet, 30 June 2025

² JPMorgan Asset Management Factsheet 30 June 25

³ The Mercantile Investment Trust Annual Report 2025, page 12, data to 31 January 2025.

⁴ Association of Investment Companies (AIC): Eight investment trusts join the next generation of dividend heroes, 19 March 2024. Dividend paid by the product may exceed the gains of the product, resulting in erosion of the capital invested. It may not be possible to maintain dividend payments indefinitely and the value of your investment could ultimately be reduced to zero. Dividend payments are not guaranteed.

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

Aims to achieve capital growth through investing in a diversified portfolio of UK medium and smaller companies. It pays quarterly dividends and aims to grow its dividend at least in line with inflation. The Company’s gearing policy is to operate within a range of 10% net cash to 20% geared.

Key Risks: 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. Companies listed on AIM tend to be smaller and early stage companies and may carry greater risks than an investment in a Company with a full listing on the London Stock Exchange.