Fund Profile

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 Smaller Companies (JESC) aims to provide capital growth from a diversified portfolio of smaller companies in developed Europe, excluding the UK.

The £667m trust (in net asset terms), is managed by Francesco Conte and Edward Greaves and utilises a high-conviction, bottom up, stock picking approach. The team focus on three key characteristics when conducting fundamental analysis on new investment ideas; quality, momentum and value. Companies they select do not need to score well on all three characteristics, but the overall portfolio should have a positive tilt to all three.

Over the longer term the trust boasts a strong track record. Over the past five years to 17th April 2019 for example, according to Morningstar the trust has delivered NAV returns of 70.7%, considerably greater than the benchmark EMIX Smaller European Companies index (52.4%) and the AIC European Smallers peer group (62%). Comparing the trust to open-ended peers in the IA OE European Smaller companies sector, it has also done a good job, outperforming the IA sector average by more than 11%.

More recently, as economic lead indicators deteriorated through 2018, the managers tilted the portfolio towards more defensive stocks, and de-geared. This led the managers to hold as much as 3.5% net cash in Q4 of 2018. Initially this helped them outperform a falling market at the start of Q4, but in retrospect they were too early to buy back into a falling market, which meant that overall they marginally underperformed the benchmark in a more volatile year.

Despite the strong long-term track record, the discount remains wide in absolute terms, but also relative to peers, and currently sits at around 14%.

Kepler View

JPMorgan European Smaller Companies offers investors a diversified exposure to some of the highest quality smaller company growth opportunities in developed Europe.

The trust has an outstanding long-term track record, largely due to the highly experienced, well embedded, management team. Their active management approach meant they started to re-position the portfolio during 2018, a process that continued into 2019. The managers report that they currently have a more balanced stance, representing their cautious but positive outlook. The defensive tilt should give the trust an additional edge in any market volatility, while still giving investors exposure to the strong idiosyncratic growth that the manager’s picks offer.

In our view, the wide discounts seen in the European smaller companies sector are a consequence of investor aversion to all things Europe. As we highlight in this article, Europe offers exposure to sectors and companies that one might struggle to find in the UK, and often command premium ratings in the US. Currently trading on a discount of around 14%, we see this moment in time as a potentially attractive entry point for investors.

BULL
BEAR
Versatile investment approach allows for quick repositioning of the portfolio, with a very experienced management team
The trust is vulnerable as a result of its euro exposure to a resurgent sterling, which is possible if 'good Brexit' materialises
Strong long-term performance
Political uncertainty in Europe is unlikely to go away any time soon, so volatility is likely to remain an issue
Wide discount offers an attractive opportunity

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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