Mercantile Investment Trust | Winterflood Research

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Liquid, well-managed exposure to UK Mid-Caps

Background: The Mercantile Investment Trust* (MRC) aims to deliver capital growth from investment in a diversified portfolio of UK medium and smaller companies. It also aims to achieve long-term dividend growth at least in line with inflation. The fund is managed by Guy Anderson and Anthony Lynch of JPMorgan Asset Management’s UK Mid and Small Cap team. The investment process is focused on attractive valuations and strong fundamentals, with an emphasis on cash flow generation and frequent interaction with company management teams.

Portfolio: The portfolio contains c.70 stocks and the active share relative to the benchmark, the FTSE All Share ex FTSE 100 ex ICs Index, was 72% as at 28 February. Key active sector weights include an overweight allocation to Industrials (+6%) and an underweight exposure to Real Estate (-13%).

Performance: Over the last ten years, MRC has delivered a NAV total return of +111% (+7.8% p.a.), outperforming the +82% (+6.2% p.a.) return of its benchmark. In addition, it has outperformed its two closest peers, JPMorgan Mid Cap (JMF) (+99%, +7.1% p.a.) and Schroder UK Mid Cap (SCP) (+100%, +7.2% p.a.), over this period. However, the fund’s absolute and relative performance suffered last year (NAV total return -23% vs benchmark -18%), which can be attributed to the portfolio’s growth bias and exposure to UK domestic consumer stocks.

*Denotes a corporate broking client of Winterflood Securities

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