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. Alexander focusses squarely on fundamentals, ignoring the short-term noise of the stock market, and invests based on his own analysis of each portfolio company, and taking a long-term view.

Alexander aims to build a low turnover portfolio of “special” companies that will outperform over the economic cycle. However, his portfolio construction aims to ensure that those companies in which he has highest conviction should contribute the most to JEO’s returns.

This process, as well as a high conviction approach to portfolio construction, has led him to outperform the benchmark over several stock market cycles (see Performance), in turn leading the trust to trade on a premium rating relative to peers over much of the last decade (see Discount).

2020 was a poor year for JEO. Since the market recovery phase after the pandemic, lower value-added, capital-intensive businesses significantly outperformed higher value-added, more capital-light businesses, which are the ones that JEO remains exposed to. That said, performance since the summer has improved considerably, with JEO largely making up its underperformance over 12 months.

The historic premium rating relative to peers gave way to a discount to peers after fraud at Wirecard was exposed (at the time, it was the largest position in JEO’s portfolio). Since then, JEO has traded on a wider discount than the peer group average. At the time of writing, JEO trades on a discount to NAV of 11.4%.

Kepler View

Having met up with Alexander recently, we believe that it is encouraging that he continues to stick to the investment process that has stood him in such good stead over the past 20 years of managing JEO. This is a highly active strategy, and as such JEO’s performance in any one year may be expected to differ quite markedly from the broader European equity market.

There are already potential signs that Alexander’s historic outperformance relative to peers is starting to return once more. Relative to the benchmark, JEO has only underperformed in three calendar years in the past two decades. 2021 is shaping up to be another year of outperformance. If the market once again starts to see Alexander’s underperformance of peers as the exception rather than the rule, we see the potential for a re-rating, as we discuss in Discount.

The board have stated their objective of maintaining the discount in single digits and, with Alexander also having bought shares for his own account during 2020, as well as regular buybacks now underway, further downside in the rating looks limited to us. Alexander’s portfolio of global leaders with growth prospects that he believes are independent of regional economic cycles means JEO looks attractive compared to Global trusts trading on an average discount of only 0.3%. Alexander appears confident in the long-term prospects for his companies, and so a double-digit discount may prove an opportune moment for long-term investors.

bull bear
Strong long-term track record from a high-conviction, stock-picking manager
Highly active portfolio can mean that at times, performance can lag the wider market
Pragmatic mandate enables manager to look for best European companies operating on a global scale
Short-term performance has been challenging, both in absolute and relative terms
Potential for a re-rating should historic outperformance of peers revert
Devon Equity Management is a young company
Continue to Portfolio

Fund History

15 Jun 2022 Fund Analysis
EOT’s wide discount in historic terms may be an opportunity…
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
13 Oct 2015 Masters of the universe
Five of the best stockpickers in the entire investment companies sector...
View all

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