Mercantile (MRC), the £1.7bn UK mid-cap investment trust run by JP Morgan, is parting company with Anthony Lynch, its co-manager for 14 years.
Lynch will step down at the end of the month to take up “new responsibilities” at JPMorgan Asset Management. Manasij (“Manny”) Hajra, co-manager of the JPM UK Equity Growth open-ended fund, will work with current co-manager Guy Anderson.
The announcement came in half-year results showing a 5.6% investment return for the six months to 31 July that beat the 3.9% return from the company’s benchmark (the FTSE All-Share index with blue chip FTSE 100 stocks and other investment trusts stripped out).
In relative terms, this was an improvement on the annual results in April which revealed the trust underperformed in the year to 31 January with a 12.3% underlying return versus the benchmark’s 15.8%.
Chair Rachel Beagles said strong stock selection in software, financial and construction stocks had driven the positive half-year performance though falls in house builder Bellway had detracted from the return.
Growth in underlying net asset vale (NAV) has outperformed the index over three and 10 years, rising 41.4% and 126.5% versus 39.3% and 81.9% advances in the benchmark. Shareholders received total returns of 51.6% and 132.2% over the same periods.
Our view
QuotedData senior analyst Richard Williams said: “Mercantile’s NAV outperformance reflects successful stock selection, particularly among technology and industrial businesses, alongside a contribution from gearing. With UK mid- and small-cap valuations still looking attractive and takeover activity highlighting the value available, the managers’ relatively high gearing reflects confidence in the opportunities ahead. The transition to a new co-manager should also be relatively seamless, given Manny Hajra’s seven years with the team. Despite its performance and the trust’s impressive longer-term record, with 10-year NAV returns comfortably ahead of its benchmark, the discount remains stubbornly wide at c.10%.”
