JPMORGAN CLAVERHOUSE: New Prime Minister Rishi Sunak has restored UK credibility on the streets, says boss of £416m fund
‘Dull is the new exciting.’ That’s the view of William Meadon, co-manager of £416m investment trust JP Morgan Claverhouse. Meadon, who runs the exchange-traded fund with Callum Abbot, says the days of cheap money, low interest rates and soaring tech stock prices are over.
For investors, he thinks now is the time to consider “get-rich-slow funds” – essentially investment vehicles such as JP Morgan Claverhouse that make money by managing a portfolio of companies paying dividends.
“Things are about as good as they can get,” Meadon says. “We offer investors dividend income equivalent to 4.7% per annum from a portfolio of 63 UK-listed stocks. Income that has grown every year for the past 50 years and is generated by a stock market that is one of the cheapest among developed markets.
The trust pays shareholders a quarterly dividend. Last year, these payments totaled 33 pence, compared to 30.5 pence the previous year, an increase of 8.2%. The shares are trading at around £7.
Meadon adds: “Amidst all the woes caused by Brexit and the pandemic, it’s time to buy the UK market. It’s at a 40% discount to the S&P and Nasdaq stock indices in the US. Buy UK stocks and you buy global companies at low prices – companies that generate their income all over the world.
“For example, why buy shares of American tobacco giant Philip Morris when you can buy British American Tobacco at a deep discount.” He thinks Rishi Sunak has managed to restore some of the “street credibility in the UK”.
Although the trust benchmarks against the broader FTSE All-Share Index, it is primarily a fund that tracks stocks that make up the FTSE 100 – the 100 largest companies by market capitalization.
Dividends are crucial, which is why Shell, BP and tobacco giant BAT are all top ten holdings.
“The FTSE 100 is a haven for income seekers,” says Meadon. “But it’s volatile and lumpy, which isn’t good for Aunt Agatha. During the 2008 financial crisis and the 2020 pandemic, we saw dividend cuts in UK plc. What we and many other equity income investment trusts are able to do is smooth out those payouts for investors.
It does this by withholding some of the income it takes from its holdings in good years and then uses it to supplement dividends in years like 2008 and 2020 when income dries up. Rival trusts such as City of London, Bankers, Alliance, F&C and Brunner have dividend growth records spanning more than 50 years.
Meadon also likes FTSE 100 companies because he says the world has changed since Russia invaded Ukraine just over a year ago. Investors, he says, are reassured by large, liquid stocks that have a global reach in terms of activity.
Major holdings outside the FTSE 100 include furniture retailer Dunelm and high-brand watch seller Watches of Switzerland. “Dunelm continues to take market share from its competitors,” says co-manager Abbot.
“What it does better than its competitors is logistics. Dunelm makes sure to have in stock the furniture that customers want. Watches of Switzerland, adds Abbot, is successfully expanding its business operations in the United States as demand for its luxury watches remains resilient.
The fund’s exposure to UK small businesses is through sister investment firm JP Morgan UK Smaller Companies.
The annual expenses of the trust total 0.66%. Its stock market identification code is 0342218 and the symbol JCH.