Quality focus has delivered on growth and income

March 24, 2021

“We are ruthless quality seekers who spend a lot of time meeting management teams, seeing over 350 every year.” – Guy Anderson

The Mercantile Investment Trust has strong track record of returns and outperformance.
The experienced six-person investment team takes an active approach to investing and focuses on quality companies.
The closed end structure provides some mitigation against market volatility and allows for smooth, consistent income distribution to investors.

The Mercantile Investment Trust has outperformed the FTSE 100 and the UK mid- and small-cap market over the long term

Cumulative returns – August 2012 to December 2020

Source: J.P. Morgan Asset Management. GBP, as at 31 December 2020. Geometric excess returns. Performance data has been calculated on NAV to NAV basis (cum income, debt at PAR value), including ongoing charges and any applicable fees, with any income reinvested, in GBP. Please note Benchmark Indices do not include fees or operating expenses and are not available for actual investment. Past performance is not a reliable indicator for current and future results.

We have achieved these results with our highly experienced team and our active, disciplined investment process. For the last 25 years, the 130-year-old Mercantile Investment Trust has focused on mid- and small-cap stocks. Our specialist team of six investment professionals has an average of 14 years industry experience and conducts over 350 meetings with company managements per year.

Absolute and excess returns (net) versus FTSE All Share ex. 100 ex. Its index

Source: J.P. Morgan Asset Management. GBP, as at 31 December 2020. Geometric excess returns. Performance data has been calculated on NAV to NAV basis (cum income, debt at PAR value), including ongoing charges and any applicable fees, with any income reinvested, in GBP. Please note Benchmark Indices do not include fees or operating expenses and are not available for actual investment. Past performance is not a reliable indicator for current and future results.

The team takes an active approach to investing, with a focus on quality, leading to differentiated positioning versus the benchmark. Companies only make it into the portfolio after they meet the key criteria of our long-tested process:

Is it a good business? We consider the company’s profitability, sustainability of earnings and capital allocation discipline.
Is it attractively valued? We look for companies where the market appears to be underestimating future prospects.
Is the outlook improving? We assess the operational momentum of the business and how this is being reflected in expectations.

Equally important is the process for exiting a position: if an investment is not meeting our operating expectations or if there is a sudden structural change that invalidates our thesis, we will sell the stock and recycle the capital into a better idea.

The Mercantile Investment Trust has provided steady income to investors

Source: J.P. Morgan Asset Management. GBP, as at 31 December 2020. Geometric excess returns. Performance data has been calculated on NAV to NAV basis (cum income, debt at PAR value), including ongoing charges and any applicable fees, with any income reinvested, in GBP. Please note Benchmark Indices do not include fees or operating expenses and are not available for actual investment. Past performance is not a reliable indicator for current and future results.

Mercantile’s focus on quality businesses with long-term growth potential helps generates above-average income for shareholders; its investment trust structure allows dividends to be supplemented from the trust’s reserves to maintain income, even when companies are cutting their payouts. Mercantile’s Board has stated its intention to at least maintain last year’s total dividend in the 2021 financial year.

As a closed end fund, the investment trust is also not affected by fund flows and can better weather volatility—portfolio managers do not have to sell the most liquid holdings to raise money for redemptions during times of market stress. This is a valuable benefit when investing in less liquid mid- and small-cap markets.

This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are not reliable indicators of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. Investment is subject to documentation. The Annual Reports and Financial Statements, AIFMD art. 23 Investor Disclosure Document and PRIIPs Key Information Document can be obtained free of charge from JPMorgan Funds Limited or www.jpmam.co.uk/investmenttrust. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.
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