JPMorgan Global Growth & Income (JGGI ) has launched a £40m share offer as the top-performing ‘best ideas’ fund responds to ongoing investor demand and a specific request to invest from a large wealth manager.

The placing, which includes an €8m (£6.8m) retail offer to private investors, will be priced 0.6% above the investment trust’s net asset value (NAV) per share just before the offer closes on 20 February.

That makes the new shares slightly cheaper than JGGI’s existing stock which currently stands on a 2% premium to NAV of 526.7p, according to the Association of Investment Companies website.

As with all new issues, the shares can be bought free of 0.5% stamp duty. That combined with the lower premium, makes it about 1.1% cheaper to buy the new shares than snap up existing ones in the stock market, JP Morgan Asset Management said. Buyers will be entitled to receive the next quarterly dividend of 4.61p per share.

The fund raise is co-ordinated by JGGI’s broker Winterflood but interested investors should contact their broker or online share-dealing website.

The issue (the second this year) is another acid test for investor sentiment after the investment company sector endured a bear market last year with widespread share price underperformance leading to very few fundraisings and no launches. Last week Invesco Bond Income Plus (BIPS ) raised £13.4m in a modest placing capped at £15m.

Having tapped out £59.6m of new shares this year, and raised £185m in regular issuance last year, JGGI hardly needs a share issue to bring in new money. Nevertheless, it was pleased to have been contacted by a wealth management firm that had decided to add the trust to its central ‘buy’ list after assessing it for over a year.

An acquisitive US-weighted £2.3bn trust, JGGI is set to swell its assets further with the merger with the £69m JPMorgan Multi-Asset Growth & Income (MATE ) announced last month.

Tristan Hillgarth, JGGI’s chair, told Citywire: ‘It is encouraging to see new interest from a large UK wealth manager in a trust that has managed to achieve scale via corporate actions, ongoing share issuance and strong performance.’

He said the trust’s size and liquidity – with £3.7m of shares on average traded daily – along with low tiered annual fees of 0.55%-0.3% would result in increasing cost savings for investors as the trust grew over time.

Impressive performance

Under fund managers Helge Skibeli, James Cook and Timothy Woodhouse in New York, JGGI has become the best performer in the AIC Global Equity Income sector over one, five and ten years, generating total returns to shareholders of 19.8%, 112.2% and 297.3% respectively.

It has an enhanced dividend policy under which it pays 4% of net assets each year in equal quarterly amounts.

The portfolio holds about 55 stocks with a 65% allocation to the US, followed by 14.7% to Europe, 3% to the UK and 8.3% to emerging markets.

The top holdings at 31 December were Microsoft (7%), Amazon (5.8%) and United Health (3.8%) with Taiwan Semiconductor (3.4%) and ASML (2.6%), the Dutch chip manufacturer, the only non-US positions in the trust’s top 10. Nvidia, the soaraway US chip maker, accounts for 3.3%.

With the US stock market trading at a record peak after big rises by mega-cap tech stocks in the past 15 months, the managers and board are wary of prospects in the short term and have left JGGI currently ungeared with no borrowing to increase its market exposure.

Growth and value

Last year 3.3% yielding JGGI had a decent year, with its share price up 22.6% and its underlying assets growing 19.5% while its benchmark, the MSCI World All Countries rose 15.3%.

Analysts at Deutsche Numis recently said the outperformance ‘was particularly impressive in 2023 given market performance was driven by a small number of US tech stocks, and the approach seeks to combine ideas in both “growth” and “value” styles’.

The managers had a slight overweight of 1% to the ‘Magnificent Seven’ tech stocks, although Apple and Google-owner Alphabet were not included. Cook recently told Citywire that the trust had held them before, saying they were ‘good businesses’ but were ‘slightly over earning’ and on high valuations.

Of the overweight position in Microsoft, Cook explained: ‘They are they are fast becoming the market leader in cloud computing. The services and software they offer on top of the cloud computing is on a market share basis leading the industry. And we see there’s a huge growth potential.’

While the US technology stocks and semiconductors make up a substantial part of the portfolio, they also have a defensive element. 

Cook said in 2023 the team had shifted to a large underweight to ‘low growth cyclical’ stocks such as some banks and life insurers, which they felt didn’t have compelling valuations and earnings were ‘towards peak levels’.

Instead the managers like high-quality defensive companies such as the Chicago Metal Exchange, which makes up 2.8% of overall assets.

‘It is actually a volatility beneficiary,’ said Cook. ‘So as volatility picks up, derivative contracts typically go higher. We think that there’s more potential for volumes to increase, particularly on the fixed income side of things.’

In a down day for the UK market, JGGI shares today slipped 1.3%, or 7p, to 531p.