Strong performance and attractive profile: JPMorgan UK Small Cap Growth and Income

JUGI’s discount belies the strong performance and attractive profile…by Ryan Lightfoot-Aminoff

Overview

JPMorgan UK Small Cap Growth & Income (JUGI) has recently completed its first year under its new moniker, following the combination of its previous iteration with stablemate JPMorgan Mid Cap (JMF). This offered several benefits, including improved liquidity, lower Charges and the introduction of an enhanced Dividend strategy whereby the trust pays four equal quarterly dividends, equivalent to 4% of the trust’s NAV on the last day of its financial year in July. JUGI was awarded KTI’s Income rating for 2025.

Regardless of these changes, the highly successful investment process remains in place, with managers Georgina Brittain and Katen Patel utilising a bottom-up, stock selection process that aims to identify high-quality companies trading at attractive valuations. This approach has delivered strong long-term outperformance over numerous time periods, including a five-year return nearly double that of the trust’s benchmark.

Near-term Performance has also been strong, driven by good stock selection, with the trust delivering positive one-year returns of 8.5%, ahead of the benchmark and peer group which have returned 5.9% and 4.1% respectively. Despite this, the trust trades at a Discount, which has returned after initially narrowing soon after the completion of the combination.

The managers argue that valuations of UK smaller companies continue to be very compelling following a period of outflows from the market. In order to capitalise on this, they have taken net Gearing to 10.6%, using the majority of the trust’s facility, which was recently renewed on better terms following the completion of the combination.
 

Analyst’s View

 
We believe JUGI is a great example of how to capitalise on the investment trust structure to create a compelling opportunity for investors. Firstly, the experienced management team of Georgina Brittain and Katen Patel have delivered excellent returns over numerous time periods, having taken full advantage of the fixed pool of capital nature of investment trusts by investing in the more illiquid, but higher growth potential, of the UK smaller companies space. This has largely been driven by stock selection, which we believe supports the potential for future Performance.

Secondly, by using the trust structure to pay an enhanced Dividend, JUGI could appeal to a wider investor base. Paying 4% of the year end NAV, this dividend means investors can generate an attractive income from an asset class not renowned for one which could provide portfolio diversification benefits. This is particularly true when considering the trust’s growth tilt, which could also provide style diversification.

Thirdly, the increased size of the trust, now the combination has been complete, has enabled the board to reduce Charges, creating an immediate benefit to investors. Whilst these figures are not transformational, they have the potential to add basis points to returns each year, which can compound over the long term.

These benefits were arguably reflected in the improved rating of the trust in mid-2024. However, as macro challenges increased, the Discount has subsequently widened. We believe this could offer a compelling entry point for long-term investors.

Bull

• Strong outperformance of both benchmark and peers over multiple time periods
• Discount to NAV has widened in past year despite good performance and benefits of combination
• Trust has passed on benefits of economies of scale to offer lower charges than peer group average

Bear

• Elevated gearing can contribute to downside risk as well as upside potential
• Whilst asset class is cheap, the potential catalyst for a recovery has proven thus far elusive
• Dividend paid from capital could impact potential future growth prospects

See the full research on JUGI here >

^Disclaimer

^{Disclosure – Non-Independent Marketing Communication}

^{This is a non-independent marketing communication commissioned by JPMorgan UK Small Cap Growth & Income (JUGI). The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.}