13th Apr 2015 17:34
LONDON (Alliance News) - JPMorgan Income & Growth Investment Trust PLC Monday said it is taking measures to offset a difficulties presented by low interest rates to its aims of generating income and capital growth for shareholders.
The split capital investment fund said that shareholder funds grew by 8.9% in the year ended January 31, beating the 7.3% total return of 7.3% delivered by the benchmark FTSE 350 index.
"As a split capital investment trust, we have dual objectives of delivering income and capital growth. The two aims are compatible when markets are rising. However, by keeping interest rates low, central bankers are making it increasingly difficult to source income without potentially distorting the search for capital growth. The board continues to mitigate this by giving our investment managers the flexibility to capture income from assets other than UK equities," Chairman Karl Sternberg said in a statement.
Sternberg said the trust has an in-built shield in the event of higher interest rates before the end of its life in November 2016 because one half of its GBP20 million borrowings is at a fixed rate.
"Our having debt in a rising market also added to our returns, offsetting the investment management fees and the other costs of running the company," Sternberg said.
The chairman noted that some shareholders have raised the question as to whether the trust will create a so-called roll-over vehicle so that shareholders that wish to remain invested in the market are able to do so.
"It is too early for us to know whether there is sufficient appetite for such an option. We continue to investigate all possibilities with JPMorgan and our brokers; and we will update shareholders by this time next year," Sternberg said.
The chairman said that there are risks facing the company, given that the end of the trust's life is just 18 months away.
"That short time period does expose us to the risk that markets react badly to any return to more conventional monetary policy, and that there is no time for markets to recover. We also face geopolitical risk in the Middle East and Russia, the possibility of chaos in UK politics, and further stresses in the Eurozone. Equally, if we take money out of markets, we may miss a further rally despite all these risks, which are well known by investors," Sternberg said.
"The board believes that our current asset allocation balances the interests of capital and income shareholders, and that we shall maintain this level of market exposure in the period leading up to our dissolution, unless extraordinary circumstances arise. Shareholders can then take their own view on the scale of these risks. We will not spring any surprises on you," the chairman said.
By Samuel Agini; [email protected]; @samuelagini
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