Yahoo Finance Questor: this investment fund outperforms the global index
Buying a global stock market tracker fund is arguably the simplest way for any investor to obtain an inflation-beating return over the long run. The MSCI AC World Index, for example, has generated an 11.5pc annualised return over the past decade. Over the same period, inflation has amounted to around 2.9pc per year on average.
Given the stunning historical performance of shares in real terms, Questor is shifting the focus of its Wealth Preserver portfolio towards the stock market. Although shares are significantly more volatile than other asset classes over the short run, our inherent long-term focus and willingness to tolerate temporary fluctuations in market values means they should be the focal point of our portfolio.
However, rather than simply purchasing a range of tracker funds, companies such as JPMorgan Global Growth & Income will instead be added to our portfolio. After all, the investment trust has comfortably outperformed the MSCI AC World Index, which is its benchmark, over recent years.
For example, over the past decade it has produced a 15.3pc annualised return. This is 3.6 percentage points greater than the annualised return of the wider index.
JP Morgan Global Growth & Income has also been a strong performer since originally being tipped by this column in April last year. Its share price has risen by 22pc, versus a 3pc gain for the FTSE 100 index, as the US stock market has surged higher.
Indeed, US-listed equities account for roughly 68pc of the trust’s assets. This is four percentage points higher than its benchmark and highlights the dominance of the US stock market on the global stage.
Although growing levels of debt and elevated political uncertainty, alongside heady valuations for some stocks, suggest the US stock market’s growth potential is now somewhat more limited than it was a year ago, an ongoing strong economic performance and the prospect of interest rate cuts mean further capital gains are likely to be ahead for investors.
While the trust’s shares trade at a 2pc premium to net asset value and it currently does not employ gearing at a time when other companies offer wide discounts and utilise substantial borrowings to magnify their returns, its track record of outperformance suggests it remains a sound long-term option.
Well-known businesses such as Microsoft, Amazon and Nvidia are among the trust’s largest holdings in a portfolio that typically numbers between 50 and 90 stocks.
Although it has the aforementioned overweight position in US-listed equities, as well as a four percentage point underweight to Japan’s stock market, the trust uses a bottom-up strategy that is not driven by a company’s listing location or sector.
This means its performance could materially differ from that of its benchmark, which in Questor’s view is ultimately the whole point of investing in actively managed funds. Otherwise, a tracker fund would produce a very similar result at a potentially lower cost and with significantly greater diversification.
Despite its large exposure to the low-yielding US stock market, the company’s dividend yield currently stands at a respectable 3.1pc.
Its shareholder payouts have risen by 8pc per annum on a per share basis over the past four years, thereby making it a very realistic income investing option, with the company aiming to pay out at least 4pc of its previous year’s NAV as a dividend each year.
In order to make room for the trust in our Wealth Preserver portfolio, the holding in Invesco Bond Income Plus will now be removed.
The high yield bond specialist has generated an 8pc capital loss and paid or declared around 17pc of our notional purchase price in dividends. This equates to a total return of roughly 9pc since August 2021, which is approximately nine percentage points behind total inflation over the same period.
Given the stock market’s long-term track record of delivering strong growth on a real terms basis, it is logical for equities to become an increasingly dominant part of our portfolio.
The JPMorgan Global Growth & Income investment trust has a highly attractive track record against the global index and yet still trades at only a modest premium to NAV, and it is a likely beneficiary of upcoming interest rate cuts in the US. It will now be added to our Wealth Preserver portfolio.
Questor says: buy
Ticker: JGGI
Share price at close: 546p
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