Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by European Opportunities. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

European Opportunities Trust (JEO) has been managed by Alexander Darwall since launch in 2000. In late 2019, JEO followed Alexander to his new fund-management company – Devon Equity Management. The same bottom-up, fundamental investment strategy is applied as has always been. Alexander looks to identify companies that retain high-growth characteristics and profitability longer than the market expects and to hold them for the long term.

Another characteristic of JEO has meant that 2020 has been a standout year for all the wrong reasons. Alexander manages high-conviction, concentrated portfolios. Over the long term this has meant he has delivered strong returns relative to the benchmark and his peer group. However, during 2020 Wirecard (now sold, but until relatively recently JEO’s largest holding) has had a significant negative impact on recent performance.

As we discuss in the Portfolio section, Alexander’s lessons learnt include the recognition that the sizing of the position had clearly been too big given the complex nature of the business, but also that he had placed too much trust in the wrong people in his due-diligence process. Nevertheless, if Alexander had not followed his investment process so rigorously (by selling immediately when the facts as he knew them changed), the impact on performance would have been significantly worse.

Over the long term JEO typically employs gearing. However, as we show in Gearing, it was taken down to zero in May. This represented an overall market de-risking exercise, and indirectly helped mitigate the damage from Wirecard.

The discount has widened to c.10% since June and both the board of JEO and Alexander himself have recently bought in shares at these levels.

Kepler View

We believe the lessons learnt from the painful Wirecard episode should not obscure the strengths of a strategy which has delivered over the long term. Up until the start of 2020, JEO was far ahead of peers on an NAV total return basis over most time frames.

As we illustrate in the Performance section, Alexander’s stock selection for the rest of the portfolio has been strong over the short and medium term, which means that we believe that the mistakes made over a single stock do not mean that his long-term track record is in any way invalid.

JEO has been de-rated relative to peers which means that, for the first time since 2009, the trust stands on a slightly wider discount than the weighted average for its peer group. This discount has not gone unnoticed by Alexander (who recently invested c. £700k), with the trust’s board subsequently buying shares back for the first time since 2011.

Alexander has a long and consistent track record and he has a very meaningful personal stake in the trust himself. It is our view that Alexander’s investment process (which remains unchanged at Devon) should, over the medium to long term, deliver attractive returns – as it has so clearly done in the past. The discount to peers is therefore unwarranted, and with the board now making purchases of the trust’s own shares, we believe this could be an opportune moment in discount terms for long-term investors.

bull bear
Strong long-term track record Wirecard demonstrates the downside risks of having a highly concentrated portfolio
High-conviction, stock-picking manager who has delivered alpha year in, year out Short-term performance has lagged the benchmark (over one year) due to Wirecard
Pragmatic mandate enables manager to look for best 'European' opportunities Devon Equity Management is a young company
Continue to Portfolio

Fund History

15 Jun 2022 Fund Analysis
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13 Oct 2021 Fund Analysis
After a torrid 2020, JEO is currently on track to deliver outperformance of the benchmark once again…
09 Sep 2021 What next for European equities?
After a strong period for European equity markets, we ask whether this trend can continue…
10 Mar 2021 Spring Conference '21
Audio and presentations from 21 of the UK’s leading investment trust managers…
04 Mar 2021 Slides and Audio: European Opportunities Trust
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 02 March...
04 Mar 2021 Fund Analysis
Down, but not out: JEO has a challenging period of performance in 2020 but we think the double-digit discount presents an opportunity...
04 Feb 2021 Eurovision 2021
Eight charts to guide investors through Europe...
19 Aug 2020 Has the time come for Europe?
With mutual eurozone debt established all eyes are on the continent once more; but what will drive relative returns?
29 Jul 2020 To be, or not to be (geared), that is the question
Gearing is part of the toolkit that trusts use to outperform OEICs. But how is it best implemented?...
25 Jul 2020 Fund Analysis
A torrid 2020 for JEO means it is on an attractive discount...
22 Oct 2019 Fund Analysis
Run by one of the most successful fund managers in the investment trust universe, JEO offers exposure to exciting growth opportunities across Europe…
11 Sep 2019 Nanny knows best: how regulation is influencing returns
New research suggests disruption is threatened by increased regulation, with clear consequences for investment strategists...
17 Jul 2019 Ready for action
In the second part of our active management series, we assess the most active managers across the major closed-ended equity sectors…
24 Apr 2019 Nothing compares to EU
Currently one of the financial world's most unloved regions, we look at the sectors that are unique to Europe and how the persistent pessimism has presented attractive opportunities…
10 Apr 2019 Because they're worth it
With the rise of the passives putting more pressure on fees than ever before, we argue that performance fees could be the key to encouraging truly active investment trust managers...
27 Feb 2019 A marathon not a sprint
Our research shows that investment trusts' structural advantages give them a significant edge for investors seeking long term capital growth...
22 Feb 2019 Fund Analysis
Jupiter European Opportunities (JEO) has reigned supreme across Europe for the past decade or so, in both consistency and extent of outperformance...
30 Jan 2019 The Growth Portfolio
Our ten investment trust picks for long-term capital growth...
28 Nov 2018 Every cloud...
The endless grinding negativity of Brexit has driven investors away from Europe in scores, leaving rich pickings for opportunistic buyers...
07 Nov 2018 The Great British Buffett
New research claims to have identified the secret of Warren Buffett's success; we apply similar principles to find the UK's answer to The Sage of Omaha...
17 Oct 2018 Fund Analysis
Jupiter European Opportunities (JEO) has reigned supreme across the Europe for the past decade or so, in both consistency and extent of outperformance...
22 Aug 2018 Reassuringly expensive?
Some investment trust premiums have been stretched to eye-watering levels. Have investors been enjoying themselves in the sun too much? We try to rationalise current levels and suggest alternatives...
09 Jul 2018 Go big or go home
The overwhelming evidence is that fund managers who are willing to back their convictions with punchy bets are the ones that tend to outperform by the highest margin...
30 May 2018 Forza Italia!
Recent weeks have seen Italy's rocky relationship with the EU thrust into the spotlight once again, but we think volatility for European equities may be a buying opportunity...
23 Jan 2018 Fishing in the right pond...
Finding a manager who can consistently outperform is difficult, but our anlaysis shows that it is possible to tilt the odds in your favour...
18 Jan 2018 Fund Analysis
The pre-eminent outperformer in the European fund sector for the past decade or so
26 Jul 2017 En Garde!
Europe is on the front foot, but investors are complacent about risks to the recovery in the longer term...
25 Jul 2017 Fund Analysis
16 Sep 2016 Bargain hunt
Political chaos in Europe provides an opportunity to acquire exposure to some of the world’s largest multinationals at a significant discount...
05 Apr 2016 Fighting spirit
Why investment trusts are the ultimate recovery play...
13 Oct 2015 Fund Analysis
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View all

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