Emma Wall: Hello and welcome to the Morningstar series, Why Should I Invest with You? I’m Emma Wall and here with me today is Will Meadon, manager of the JPMorgan Claverhouse Trust (JCH).
Hello, Will.
Will Meadon: Morning.
Wall: So the Board brought you on board about 18 months ago. Why did they make that decision?
Meadon: Well, JPMorgan Claverhouse is the flagship U.K. investment trust for JPMorgan and over medium to long-term has a very good record. The fund had a particularly tough time in the credit crunch, 2007-2008, which wiped out many of the good figures that have been built up. So the Board looked at the numbers for the five years to December 2011 thought they were a bit disappointing and wants to see some change, and amongst other things, asked me to come on board from March 1, 2012.
Wall: So you now run the fund with Sarah Emly. How has the strategy changed since you’ve come on board?
Meadon: It’s changed in several ways. I suppose the most important thing is it’s a much more focused fund now. The Board has asked us to hold just between 60 and 80 stocks. At times, historically, Claverhouse had more than 100 stocks in the portfolio. So it’s much more focused portfolio. There is much more clarity on gearing and how gearing is used. This is a structurally geared trust. There is a £30 million 7% 2020 debenture. But the Board has also given me tactical discretion over gearing, so I can add or subtract gearing according to my views on markets.
Wall: Is it long term? Is it short term?
Meadon: It’s very much emphasis on the medium to long term. This isn’t a fund for short-term investors.
Wall: Then looking at the medium to long term, what’s your outlook for the U.K. stock market and economy?
Meadon: Well, things are getting significantly better in the economy. The stock market has taken some, or arguably much of that on board. But the figures you are seeing for the economy at the moment, the U.K. economy is the fastest growing developed economy in the Western world at the moment, some 1.7% for this year. It could be 2.5% next year; some economists have 3% forecast. Unemployment is falling quite sharply; 100,000 new private sector jobs being added every month. So the economy undoubtedly is getting better. In fact, for the first time in five, six years I find myself worrying that it might be growing too quickly and that interest rates consequently may have to go up. But I think we’re still some way away from that.
Wall: Is it sustainable then?
Meadon: The growth, I think it is, provided the economy doesn’t overheat. I mean, 2%, 2.5% I think the Chancellor and both the Governor of the Bank of England, Mark Carney, can live with. If he gets to 3%, 3.5%, I think you’ll start to see interest rates going up.
Wall: How does the stock market react to this?
Meadon: The stock market, as you know, had a tremendous run from the low of March ‘09. Like most Western markets, it’s almost doubled from the low. But interestingly, the FTSE at 6,700 is still some 200, 300 points off the high. Last night the Dow Jones hit a new all-time high. So the U.K. in some ways has been a laggard, and consequently I see some value there, particularly with attractive yields on offer as well.
Wall: So positive news to come?
Meadon: Positive news to come, I think.
Wall: Thank you very much, Will.
Meadon: Pleasure.
Wall: This is Emma Wall for Morningstar. Thank you for watching.