History proves that the key to successful stock market investing is time in the market, and hence that investors with the endurance and patience to adopt a long-term perspective will be rewarded over time. This is especially true for investment in medium and smaller-sized companies which have the capacity to grow into larger businesses but need time to realise their full potential. Indeed, it may surprise many to learn that the UK’s medium and smaller-sized companies have generated higher returns than the UK’s largest companies, as well as outperforming global markets, over the long-term.

The Mercantile Investment Trust (MRC) targets this vibrant, innovative, growth-oriented sector of the UK market, and its investment approach is the embodiment of the kind of enduring, patient investing that delivers long-term success. The Mercantile’s history stretches back 140 years, and with over £2.0bn in assets under management, making it the largest UK equity investment trust, it is one of JPMorgan Asset Management flagship trusts. MRC’s size also facilitates a very competitive ongoing charge and ready liquidity.

The Mercantile benefits not only from its longevity and size, but also from the long experience of its management team. Guy Anderson has more than 20 years’ industry experience, while Anthony Lynch has 15 years in the industry and has worked alongside Anderson since 2012. MRC’s strong long-term performance track record of outperformance of the market, combined with a steadily growing dividend, provide ample evidence of the value of their insights, expertise and management continuity.

MRC’s more recent outperformance contrasts sharply with the fate of many other investors, who have struggled in the face of a run of challenging events over recent years – a pandemic, a European war, high inflation, and a rapid rise in interest rates. This is the case because long experience has taught Anderson and Lynch that such periods of uncertainty are often the ideal time for forward-looking managers to invest, as volatility generates opportunities.

For example, prior to 2023, they had avoided exposure to the UK real estate sector, on the view that valuations were stretched and not reflective of the increase in interest rates following elevated levels of inflation in the economy. A sharp sell-off in the property sector followed as valuations adjusted to reflect this new reality.

MCR’s managers saw this sell-off as a chance to begin increasing exposure to the sector at attractive levels, in anticipation of a stabilisation in the interest rate environment. In January 2023, the managers purchased LondonMetric Property, a diversified REIT – the REIT has since delivered a total return of 9% to date.¹

As this example illustrates, MRC is actively managed, and Anderson and Lynch are always alert for new opportunities, and quick to respond to emerging investment opportunities.

They are equally willing to act when the investment case for a portfolio company deteriorates. However, their long-term horizon means that the trust also has some very longstanding holdings which have consistently contributed to portfolio returns over many years.

For instance, its position in Softcat, a software and hardware reseller, was initiated in 2015 at the company’s IPO and has delivered an average annual total return of 29% since acquisition. Similarly, the managers acquired Games Workshop, a manufacturer and retailer of table-top gaming figurines, in 2017, and since then, the stock has delivered an average annual total return of 39%.²

While some investors will always be tempted to seek quick and ‘easy’ short-term profits from the latest investment fad, this is a near-sighted and very risky approach likely to be fraught with disappointment, not to mention capital losses. By contrast, The Mercantile’s more considered, patient approach has delivered the kind of results that testify to the enduring merits of investing for the long-term.

¹ Data as of 31/01/2024

² Data as of 31/01/2024

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.

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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