Fund Profile

JPMorgan European Discovery 01 September 2021

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan European Discovery. 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

JPMorgan European Discovery Trust (JEDT) offers investors a portfolio of small- and mid-cap companies across developed Europe (excluding the UK), following a balanced process that can invest in both expensive growth and cheap recovery companies. JEDT has recently changed its name, and was known as JPMorgan European Smaller Companies Trust until June 2021. The new name is intended to better reflect the trust’s investment strategy and portfolio, as it can invest across the European small- and mid-cap market in companies ranging in size from €500m to €8bn.

The management team, led by Francesco Conte and Edward Greaves, follow a process based around three key pillars: ‘value’, ‘quality’ and ‘momentum’. We explain these in greater detail in the Portfolio section. Though the team are bottom-up stock pickers, a number of thematic trends have naturally emerged from their process. While the overarching themes remain the same, the team have begun to make subtle changes to how they are incorporated, adapting to the increasing valuations in certain sectors.

Over the last five years JEDT has outperformed its benchmark, though it continues to lag its peer group average. JEDT’s recent outperformance has been driven by its sectoral allocation, which capitalised on the tailwinds created by some thematic trends. Moreover, the JEDT team highlight the relative strength of European small caps, which have outperformed European large caps by nearly 100% over ten years. European small caps have also kept pace with global equity markets, as we describe in the Performance section. JEDT has also seen its ESG credentials improving, having now been rated as ‘above average’ by Morningstar. JEDT currently trades on a 13.3% discount, one of the widest of any trust in both the European small-cap and large-cap peer groups.

Kepler View

We view JEDT as offering investors a measured approach to European small-cap growth investing. While the managers are clear in their intention to purchase companies with long growth trajectories, this is tempered by their focus on quality and valuation sensitivity. This may be attractive to more cautious investors who still wish to gain access to attractive growth opportunities in Europe without having to expose themselves to substantial valuation risk. We think this may become particularly relevant during a rising interest rate environment, as it could impair the more expensive growth stocks.

JEDT’s increasing ESG credentials could make it appeal to investors who value this highly, now that its ESG score has been upgraded to ‘above average’, which was achieved without adopting an explicit ESG exclusion system. The team’s use of sustainability as an investment theme has been a contributing factor, and may also be able to provide additional tailwinds for JEDT’s NAV return. The EU is in the process of rolling out a series of stimulus and policy measures to promote economic sustainability, which may prove to be directly beneficial for many of JEDT’s holdings, either through increased demand for renewables or through the infrastructure projects vital for their provision.

In our view, JEDT’s current discount could offer a highly attractive entry point, with it having one of the widest discounts of any European trust. Should sentiment towards European equities improve and the managers continue their history of generating outperformance of the benchmark, this could prove a powerful combination.

bull bear
Structured approach to quality growth investing, supported by thematic tailwinds
Balanced approach means it may underperform in sharp value or growth rallies
Above average and improving ESG credentials
Revenue reserve has nearly been depleted
Wide discount offers attractive entry point, even relative to peers
Use of gearing can amplify losses
Continue to Portfolio

Fund History

21 Jun 2022 Fund Analysis
JEDT’s wide discount may be an opportunity to ‘buy the dip’ in a high-quality portfolio…
09 Sep 2021 What next for European equities?
After a strong period for European equity markets, we ask whether this trend can continue…
01 Sep 2021 Fund Analysis
JEDT’s shares are trading at the widest discount of any European trust…
04 Aug 2021 Uncovering Europe’s hidden gems
European equities are back in vogue, with massive fiscal and monetary support, economic re-openings, and a sizable valuation discount relative to the US. All of which provide an attractive macro backdrop for investors according to JPMorgan...
28 Apr 2021 The next value opportunity?
Two of our analysts debate whether Europe's improving vaccination programme will be the next opportunity for investors in their pursuit of returns...
04 Feb 2021 Eurovision 2021
Eight charts to guide investors through Europe...
04 Feb 2021 Fund Analysis
JESC offers investors a structured approach to European small-cap investing at an attractive discount…
11 Nov 2020 Now that's what I call a discount!
Presentations and audio from our conference focussed on discount opportunities in the investment trust sector…
11 Nov 2020 Slides and Audio: JPMorgan European Smaller Companies
View the presentation and listen to the audio from our 'Discounts in Focus' event on 05 November...
22 Jul 2020 Fund Analysis
With an exceptional track record, JESC offers a balanced portfolio at an attractive discount…
08 Jan 2020 Fund Analysis
Offering a unique approach to identifying opportunities, JESC is currently trading at an unusually wide discount…
26 Jun 2019 Measure for measure
In the first of a two-part series, we examine the tools investors can use to assess how active a manager actually is…
13 Jun 2019 Real growth in a world of fake news
Presentations and audio from our event at the London Stock Exchange, where six fund managers set out their stall for an exciting future...
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…
24 Apr 2019 Fund Analysis
With a rebalanced portfolio, JPMorgan European Smaller Companies (JESC) offers a balanced portfolio poised for rising market volatility...
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...
26 Nov 2018 Fund Analysis
The trust has delivered impressive results over the 20 years that manager Francesco Conte has been at the helm...
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...
23 Jan 2018 Fund Analysis
A high conviction European smaller companies portfolio managed by a team which has generated excellent alpha and sector beating returns...
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
View all

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