JP Morgan European changes tack to capture continental divi growth

The JP Morgan European Investment Trust is planning to change its income portfolio to focus on continental companies.

It hopes the move will better capture dividend growth outside of the UK market, and will see the trust switch away from its current pan-European focus in its income portfolio.

Historically, it has allocated to UK-listed companies in order to provide a sustainable yield, however, the dividend landscape has shifted since the financial crisis and caused UK income stocks such as banks and BP to cut shareholder payouts.

In contrast, corporate balance sheets in Europe are significantly stronger and steps have been taken at management level to protect these while maintaining or increasing dividends, JP Morgan said.

Consequently, the Income portfolio’s benchmark will switch to the MSCI Europe ex UK index, in sterling with net dividends reinvested, from the MSCI Europe index.

The growth portfolio is also set to change its benchmark to the same index, from the FTSE World Europe ex UK, to allow for like-with-like comparison.

Stephen Macklow-Smith, who manages the Income portfolio alongside Michael Barakos and Alexander Fitzalan-Howard, said: ‘Throughout the recent crisis many European companies have been quietly prospering, simply because they make the stuff that the rest of the world is queuing up to buy.

‘Exports are the key driver of growth in Europe, rather than consumption or government expenditure, both of which are more affected by the domestic economic picture. Around 50% of European companies’ revenues are from outside Europe, and emerging markets are key.’

The proposal to change benchmarks will be put forward to shareholders at a general meeting on 26 March.