Q&A: Managing the largest UK equity investment trust

Guy Anderson answers the top five things you want to know about managing The Mercantile Investment Trust.

Go to the profile of Guy Anderson
Oct 26, 2017

At a recent event, we asked Advisers to put their top questions to Guy Anderson, portfolio manager of The Mercantile Investment Trust – the largest investment trust focused on UK equities1.

Have another question for Guy? Leave a comment below.

Are UK mid-caps essentially the same thing as UK Plc?

Absolutely not—and there are two main reasons why. First, there’s a common misconception that the mid- and small-cap space is exposed to the UK alone. In actual fact, these companies generate more than 45% of their revenues from outside the UK. And second, mid- and small-caps don’t just grow in line with the economy; instead, they are a particularly dynamic group of companies. As an example, Mercantile invests in several “disruptor” companies—like Moneysupermarket.com and B&M—which we believe will grow faster than their respective markets.

What’s driving the outperformance of UK mid- and small-caps vs. large-caps?

UK mid- and small-caps have outperformed their larger counterparts over the longer term—both in the UK and internationally. We believe this is underpinned by two key structural factors: first, these companies are at an early stage in their lifecycle so tend to be high growth with flexible business models and more adaptable to changing environments; second, their smaller size gives them the power both to make meaningful acquisitions more easily/cheaply, and to be acquired themselves, with the associated premium on top.

What’s behind The Mercantile Investment Trust’s actively managed approach?

Many institutional funds can only own a certain amount of any one company in their portfolios, and can only invest in a limited proportion of smaller companies. As a result, smaller companies tend to be less well researched than their larger counterparts, with lower information efficiency. And that opens up a great opportunity for our specialist teams to add value through an actively managed approach.

At a stock level, how do you separate the winners from the losers?

Our four-person, specialist investment team follows a rigorous investment process to identify our highest-conviction stocks. But we firmly believe that investment process needs to be backed up by a real hands-on approach to the stocks we invest in, so we attend more than 300 management meetings every year for an unparalleled, on-the-ground insight into those names.

The Mercantile Investment Trust is a large, liquid investment trust. Does that also mean it’s expensive?

The Mercantile Investment Trust plc is one of the leading UK equity trust, with assets over GBP 2 billion2. Its shares are also highly liquid, with an average daily volume of more than GBP 4 million. But it’s also a very cost-effective way to access a diversified portfolio of mid- and small-caps, with ongoing charges of 0.48%, and a stated policy of reducing those charges by a further 5bps.


Read more

1Source: The Association of Investment Companies as at 30 September 2017. Data provide by Morningstar © Morningstar. All Rights Reserved.2Source: J.P. Morgan Asset Management, 30 September 2017.

Read more about The Mercantile Investment Trust >


For Professional Clients/ Qualified Investors only – not for Retail use or distribution.

This is a promotional article and as such the views contained herein are not to be taken as advice or 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 article 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. Both past performance and yield are not a reliable indicator to 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. You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored for legal, security and training purposes. You should also take note that information and data from communications with you will be collected, stored and processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following website www.jpmorgan.com/pages/privacy.

Investment is subject to documentation (Investor Disclosure Document, Key Features and Terms and Conditions), copies of which can be obtained free of charge from JPMorgan Asset Management Marketing Limited. Issued by JPMorgan Asset Management Marketing Limited which is authorized and regulated in the UK by the Financial Conduct Authority. Registered in England No: 288553. Registered address: 25 Bank St, Canary Wharf, London E14 5JP. 2dea5230-b021-11e7-9842-005056960c8a

Go to the profile of Guy Anderson

Guy Anderson

Fund Manager, The Mercantile Investment Trust plc, J.P. Morgan Asset Management

Guy Anderson is portfolio manager of The Mercantile Investment Trust within J.P. Morgan Asset Management's UK Equity team.


Go to the profile of John
John 6 months ago