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, applying the same consistent approach to stock picking. Alexander believes that his focus on ‘all-weather’ businesses stands the trust in good stead in these uncertain times.

In the recent interim results, Alexander identified several new challenges. However, he believes that when the era of ‘endless free money’ ends and interest rates start to rise, his portfolio of ‘special’, lowly levered global companies with strong pricing power will serve to re-establish JEO’s record of outperformance.

Alexander’s focus on fundamentals, ignoring the noise in markets and taking a long-term view means this is a pure stock-picking Portfolio. He runs the portfolio in a concentrated manner. Despite being more concentrated, NAV volatility is not out of line with peers. We attribute this to portfolio construction, with Alexander identifying different investment drivers behind each holding.

The six months to 30 November were poor in both absolute and relative terms. The Wirecard fraud was a significant detractor. However, other non-COVID-19 issues have hit other holdings and, more latterly, lack of exposure to many of the reflationary and cyclical stocks have hindered relative performance. JEO has only underperformed its benchmark in three of the nineteen financial years since launch.

On a current Discount of 9.9%, JEO is the only trust in the AIC Europe sector with a negative Z-score, suggesting that its discount is wide relative to the position a year ago. In fact, the discount is wide relative to its long-term history too – having last traded on this level of discount for any stretch of time back in 2009/2010.

Kepler View

As the interims illustrate, the six months to 30 November 2020 was not plain sailing for JEO. That said, it is managed in a high-conviction and concentrated manner, so we would not expect performance to necessarily echo the wider market.

As we discuss in Portfolio, Alexander observes that recent challenging performance, Wirecard aside, is more a reflection of short-term market sentiment rather than based on fundamentals. He is confident that his businesses are in a position to deliver strong outperformance over the long term, whatever the economic environment.

Whilst 2020 was hard for JEO, we believe it is more relevant to look at longer-term track records. Alexander has run JEO since 2000, over which time he has only underperformed the benchmark in three financial years.

The discount has widened to c. 10% since the Wirecard fraud was revealed. Subsequent performance has, we think, contributed to it remaining wide. However, the board have stated their objective of maintaining the discount in single digits and, with Alexander also having bought shares for his own account, as well as regular buybacks now underway, further downside in the rating terms looks limited to us.

With Alexander confident on the long-term prospects for his companies, it could be time to look through the ‘noise’ of short-term performance and recognise that a double-digit discount may prove an opportune moment in for long-term investors to enter.

BULL
BEAR
Strong long-term track record
Highly active portfolio can mean that at times, performance can lag the wider market
High-conviction, stock-picking manager who has delivered alpha in 16 out of 19 years of managing trust
Short-term performance has been challenging, both in absolute and relative terms
Pragmatic mandate enables manager to look for best European companies operating on a global scale
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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