JP Morgan Claverhouse Investment Trust portfolio managers William Meadon and Callum Abbot labelled 2022 a ‘significant and sobering year’ as the trust’s net asset value (NAV) declined 4.6% over the 12 months to 31 December.
Its FTSE All-Share benchmark, in comparison, rose 0.3%.
Meadon and Abbot said a “veritable witches’ brew” of challenges were thrown at investors over the year as assets tumbled due to Russia’s invasion of Ukraine, alongside political instability in the UK.
However, the underperformance came in the first half of the year, with the trust’s NAV plummeting 12.8% to the end of June, a steep 8.2 percentage points below the FTSE All-Share.
Performance picked up in the second half, which the portfolio managers attributed to significant portfolio changes which aimed to improve the trust’s resilience to the global challenges impacting markets throughout the year.
Those changes included adding to its holdings in BP and Shell, with both firms benefitting from the tailwinds arising from surging prices for oil and gas.
Claverhouse also added a new position in alternative asset manager Man Group due to its recent positive recent performance.
A new holding in catering services firm Compass Group was also introduced to the portfolio, largely due to its diverse client base meaning the firm is relatively immune to conventional economic downturns.
Meanwhile, the firm exited Russian holdings Polymetal and Evraz as the war in Ukraine came to fruition.
The trust exited its holdings in various asset managers including Scottish Mortgage IT, Polar Capital, and Liontrust due to their exposure to growth-style companies, while it ‘reluctantly’ sold stakes in BHP and Ferguson following their delisting from the main UK stock market.
Looking ahead
Looking towards the new financial year, Meadon and Abbot added: “In a lower growth environment, dividend income is likely to comprise a higher proportion of future total returns. Consequently, stocks offering high, predictable income should be re-rated – as, hopefully, will high income Investment Trusts like Claverhouse, which have a long track record of dividend growth. This trend is likely to be supported by investors’ increased need for income given the current cost of living crisis.
“The dangerous ‘get rich quick’ era of recent years, which placed crypto currencies, Nasdaq stocks and profitless technology names in the ascendancy, is well and truly over. In this new, more challenged world, investors will need to extend their time horizons and re-learn to appreciate traditional investment virtues such as slow, steady compounding and the certainty of access to their money.
“Further tough economic times no doubt lie ahead. But the arrival of a new, more cautious era should play to Claverhouse’s strengths – its long-term prudent approach of investing in good value, dividend-paying, quality UK companies – and we are confident that shareholders will be rewarded for their patience.”
Claverhouse became the eight entrant into the AIC’s dividend hero half-century club by raising its total dividend per share for the year to 33p from 30.5p, marking the 50th consecutive year of payout increases.
See also: ‘Exceptional eight’ investment trusts hit dividend payment half century
