JPMorgan Global Growth & Income (JGGI), formerly known as the JPMorgan Overseas Investment Trust, has evolved significantly over the past decade, pioneering a strategy that allows it to pay an annual dividend of at least 4% of net assets, regardless of the income generated by its underlying holdings. This innovative approach, adopted ten years ago, aimed to tackle the persistent discount to net asset value (NAV) and provide investors with an attractive income stream without being constrained by a narrow hunt for yield. The strategy proved highly successful, leading to improved performance and the elimination of the NAV discount for a period, attracting substantial investor interest.
The trust's growth has been remarkable, expanding from £200 million in assets a decade ago to a substantial £3.4 billion today. This expansion was achieved through a combination of absorbing two other trusts in 2021 and 2025, alongside issuing new shares for cash, which has also contributed to greater economies of scale and reduced operating costs to an efficient 0.42%. However, the wider market downturn for investment trusts in 2022 saw JGGI's shares revert to trading at a discount, prompting the directors to implement share buybacks to mitigate this. While the discount has since narrowed, performance began to flag in August 2024, with the trust's NAV return of 16.7% over one year and 50.9% over three years lagging its benchmark, the MSCI AC World index, by 11% and 13.4% respectively. Despite this, manager James Cook highlights that the trust remains nearly 2% per year (net of fees) ahead of its benchmark since the strategic shift.
Cook attributes the recent period of weaker returns to a market heavily driven by momentum rather than fundamental valuations and earnings growth, a trend he believes will eventually reverse. He noted, "We have seen many similar drawdowns over the last 30 years for our style. On average, they last a year and cost performance 9%." The current drawdown has been more prolonged and costly, reflecting prevailing market conditions. However, Cook remains optimistic, stating, "A return to normal will be very good for fundamental investors, as it has been after previous such phases." His investment philosophy focuses on identifying companies with high-quality earnings growing 2% faster than average, yet valued similarly to the broader market based on free cash flow – a combination he states is found in less than 3% of the 2,500 stocks in their investment universe.
In response to market dynamics, Cook has strategically adjusted the portfolio, reducing exposure to "low growth cyclicals" and significantly increasing holdings in AI-related semiconductor stocks. Nvidia, for instance, now constitutes 6.3% of the portfolio, with Cook noting its "trough-level multiple" despite the accelerating AI market and the superior power of its newest Rubin chip compared to the Blackwell chip. TSMC, a dominant player producing over 90% of the world's leading-edge chips, is also a top-five holding, valued for its attractive valuation. Overall, the technology sector now accounts for 25% of the portfolio, excluding companies like Alphabet and Amazon, which are classified elsewhere. Cook has also added companies such as payments network Mastercard, insurer Tokyo Marine, and assisted living provider Vesta, alongside oil major Shell, each selected for specific growth drivers or attractive valuations.
The flexibility of JGGI's dividend strategy, which allows payments from capital, enables the trust to hold significant positions in growth-oriented companies like Alphabet, Amazon, Apple, Microsoft, Nvidia, and TSMC, which typically offer low yields. This pioneering approach has been emulated by several other trusts and firms, reducing JGGI's unique competitive edge. Nevertheless, for UK investors seeking an attractive income stream without compromising on capital growth potential, JGGI's model remains compelling. Cook's conviction that the current period of underperformance is nearing its end offers a hopeful outlook for future returns, particularly as the market potentially shifts back towards valuing fundamental strengths over pure momentum.