JPMorgan China Growth & Income (JCGI) chair Alexandra Mackesy has welcomed a narrowing in the investment trust’s underperformance after what she said had been three difficult years. The £238m listed fund generated an underlying return of 29.3% for the 12 months to 30 September.
While that was below the benchmark’s 30.3% return, it underpinned a total return to shareholders of 35.2%, and was an improvement on the previous year when the trust made a net asset value (NAV) total return of just 3.6% compared to the MSCI China’s 12.7%.
In the latest financial year fund manager Howard Wang pared back holdings in consumer discretionary stocks and went significantly overweight in industrial companies.
He said, “we have concentrated portfolio holdings in two areas: domestically focused businesses with exposure to structural growth tailwinds such as technology advancement and energy transformation; and exporters with global competitiveness, that have strong pricing power and well-diversified supply chains and are thus well-positioned to weather the challenges presented by higher tariffs.”
Falls in food delivery platform Meituan and electronics group Xiaomi detracted from performance, however.
The 4% dividend payer intends to lift its quarterly payout by 24.2% to 3.39p per share to give a total of 13.56p for the current financial year.
The company’s admitted its three-year performance remained subdued with an underlying NAV total return of 12.9% at 30 September and total shareholder return of 17.2% compared to 41.4% for the MSCI China.
Over 10 years, however, it said it had outperformed the benchmark, generating 145.4% from its investments and providing 172.6% to shareholders, above the 120.3% from the index.
It skipped over the five-year numbers which currently show at 19 December a 40% slump in net asset value and 44% total shareholder loss against a 13% decline in the benchmark as a result of big falls in 2021 and 2022. Despite this the share price stands 6.7% below NAV, narrower than the 9% discounts on rivals Baillie Gifford China Growth (BGCG) and Fidelity China Special Situations (FCSS) which have lost 31% and 7% respectively.
Our view
James Carthew, head of investment company research at QuotedData, said: “There is a growing gap between the returns of JCGI and its peer group, with its five-year numbers looking particularly poor and the NAV less than half what it was in 2021. The board has acknowledged the problem and is implementing changes to the investment policy, while the manager is investing more in its team. These changes may bear fruit in time, but for now, it doesn’t really make sense to me that JCGI trades on a narrower discount than its peers.”
