JPMorgan Global Growth and Income (JGGI ) has proven its ability to absorb new assets making it an appealing destination for JPMorgan Mult-Asset Growth & Income (MATE ), whose small size has reduced its appeal.

In a stock exchange announcement on Wednesday morning, the two companies said MATE would be liquidated with the new shares being issued in the premium-rated JGGI, the number of which would be calculated based on the net asset value of each company.

The combined portfolio would have underlying assets of £2.2bn, the largest by far of the Association of Investment Companies’ Global Equity Income sector, and continued to be run by Helge Skibeli, James Cook and Tim Woodhouse.

While the named managers on the two trusts are different, MATE has been run by Katy Thorneycroft and Gareth Witcomb, about 50% of the multi-asset fund’s assets have been run by the same investment team.  

Sarah MacAulay, chair of MATE, said its size, just £69m in assets, has proven to be a barrier and the current market conditions have meant growth prospects are ‘limited’ as it has traded on a 3.3% discount.

‘Unfortunately, size does matter due to the implications for costs and for the liquidity of MATE’s shares,’ MacAulay said.

Shareholders of MATE voiced dissatisfaction with the trust at its annual general meeting in July, when 25% of votes were cast against its continuation.

The fund manager of both trusts, JPMorgan Asset Management, has agreed to pay the corporate costs of the combination by waiving its management fee on the new enlarged entity. However, costs relating to the realignment or realisation of the multi-asset portfolio will not be covered.

Investors will receive documentation by the end of February with general meetings scheduled in March for shareholders to vote.

Peel Hunt analyst Markuz Jaffe said he ‘applauded efforts by boards to solve issues around lack of scale and low liquidity’.

He noted that shareholders in the multi-asset trust are not being offered a cash exit, but given JGGI is trading on a premium there is still a ‘rating pick-up on offer’.

The announcement follows news from November when JPMorgan’s Mid Cap and UK Smaller Companies investment trusts agreed to merge, creating a larger, more liquid portfolio of about £400m.

JGGI success

JPMorgan Global Growth has established a track record for combining investment companies having completed mergers with The Scottish Investment Trust and JPMorgan Elect in 2022.

The portfolio trades at 504p, a slight premium to the 497p net asset value. This premium, which averaged 1.2% in 2023, allowed it to continually issue shares last year, one of very few trusts to do so.

Last year JGGI delivered total underlying returns of 19.5%, while MATE’s net asset value was up 11.1%. Over five years Global Growth has delivered 112.8% in underlying returns, while its index the MSCI All Country World rose 73.9% in that time.

Tristan Hillgarth, chair of JGGI, said the proposals will provide ‘additional scale’ which ‘contribute to cost savings for shareholders’ who benefit from a tiered fee structure and the fact that fixed costs are spread over a larger asset base.