Investment Ideas

The power of equity income investing

We believe equities should remain a fundamental component of asset allocation. The key is to broaden allocations to encompass a more diverse selection of stocks and adopt a total return approach, which may allow for continued exposure to capital growth potential while capturing income opportunities.

Important Information

1. The Fund invests primarily (at least 70%) in equity securities of listed companies, globally, and using derivatives where appropriate.
2. The Fund is therefore exposed to risks related to equity, derivatives, concentration, emerging markets, smaller companies, currency, hedging, class currency and currency hedged classes.  RMB hedged class also exposes to risks associated with the RMB currency. RMB is currently not freely convertible and RMB convertibility from offshore RMB (CNH) to onshore RMB (CNY) is a managed currency process subject to foreign exchange control policies of and restrictions imposed by the Chinese government. There can be no assurance that RMB will not be subject to devaluation at some point. The Manager may, under extreme market conditions when there is not sufficient RMB for currency conversion and with the approval of the Trustee, pay redemption monies and/or distributions in USD.
3. Where the income generated by the Fund is insufficient to pay a distribution as the Fund declares, the Manager may at its discretion determine such distributions may be paid from capital including realised and unrealised capital gains. Investors should note that the payment of distributions out of capital represents a return or withdrawal of part of the amount they originally invested or from any capital gains attributable to that original investment. Any payments of distributions by the Fund may result in an immediate decrease in the net asset value per unit. Also, a positive distribution yield does not imply a positive return on the total investment.
4. Investors may be subject to substantial losses.
5. Investors should not solely rely on this document to make any investment decision.

Navigating policy uncertainties and high equity valuation

Over the past 2 years, equity markets have been driven by the exceptional performance of a select group of technology companies, resulting in robust returns, particularly in the United States. The rally has prompted concerns about elevated valuations and the ability of the companies to sustain the market momentum.

Adding to this uncertainty are the policies of U.S. President Donald Trump's second administration. Fluctuations in tariffs and political rhetoric along with concerns about a potential rise in inflation that might lead the Federal Reserve to alter its rate cut trajectory, have led investors to adopt a more cautious stance.

While we expect volatility to persist throughout the remainder of 2025, we believe equities should remain a fundamental component of asset allocation. The key is to broaden allocations to encompass a diverse selection of stocks and to adopt a total return approach, which may allow for continued exposure to capital growth potential while capturing income opportunities.  

Focusing on income and staying invested in equities

The JPMorgan Global Equity High Income Strategy is designed to seek a high level of income while maintaining prospect for long-term capital appreciation1. The portfolio consists of two key components:  

  1. A diversified, global equity income portfolio invests across the yield spectrum, with an emphasis on underappreciated companies that exhibit a blend of attractive dividend yield and sustainable dividend growth – also known as dividend compounders. It also includes smaller allocations to companies with higher dividend growth and higher dividend yield to form a well-balanced core equity portfolio.
  2. An options overlay strategy that aims to generates additional income through selling call options, seeking to deliver a monthly income stream from associated option premiums2.

This strategy combines equities with options to strike a balance among yield, capital growth, and risks. Through option writing, it may sacrifice some potential market upside in return for additional income, while avoiding leverage and taking on the duration risks typically associated with bonds.    

 

J.P. Morgan Asset Management

For illustrative purposes only. The manager seeks to achieve the stated objectives.  There can be no guarantee the objectives will be met.  There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends. Yield is not guaranteed and may change over time. Positive yield does not imply positive returns. **Potential market participation is any capital appreciation/depreciation less forgone upside. 

Opportunities with Global Equity High Income

Opportunities for this strategy given uncertain direction of equity markets could include:

  1. Market sell-off: Increased volatility can provide elevated levels of income through option writing. The option premiums collected, combined with the relatively conversative equity income portfolio, may potentially help in managing downside risk.
  2.  Choppy, range-bound market: The income obtained in the form of dividends and option premiums may continue to contribute to total return.
  3. Market broadens beyond the few sectors and markets: The portfolio may be well-positioned to capture a wider opportunity set as it diversifies across multiple sectors and locations.

Conclusion

Given the expectations of a volatile market, including income in a diversified equity portfolio can add resiliency to overall equity investments and help build a stronger portfolio.  

It is also important to remember that time in the market is more important than timing the market for investors aiming to achieve long-term returns. In our view, investors should think from a total return perspective to manage volatility. This may help maintain a strategic asset allocation in equities.

Global Equity High Income