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 portfolio of smaller companies in developed Europe, excluding the UK.

Francesco Conte and Edward Greaves run the £654m trust, searching for attractively valued, high-quality stocks with positive momentum which they believe can outperform the market. The managers believe that Europe offers a unique mix of companies, in particular a number which are disrupting industries with nimble business models. Three key themes are evident in the portfolio and typify the kind of opportunities the managers are seeking: sustainability, wellness and technology.

Supported by a team of 49 analysts, the investment process uses both qualitative and quantitative methods to narrow down a universe of more than 1000 companies. This detailed approach helps to identify and compare three key characteristics for new investment ideas: quality, momentum and value. The managers believe that their balanced approach improves risk-adjusted returns and enables them to outperform through the different stages of cycles (e.g. both during growth rallies and at times when value comes back into favour).

As we discuss in the Performance section, JESC has an excellent long-term track record of outperforming the benchmark and the peer group. Performance over the past year however has been slightly more subdued, largely due to the low exposure the trust has to the highest rated companies which have driven benchmark returns. This has resulted in JESC spending the last year trading at a double-digit discount, which currently sits at 17.1%, offering a potentially attractive entry point for investors looking to access some of the unique smaller companies in developed Europe.

Kepler View

Over the long term, European Smaller Companies has been one of the strongest performing sectors across the globe. The JESC managers believe this is because it represents a unique blend of sectors and companies which are less prominent in other regions. At the same time, since the 2016 Brexit referendum valuations across Europe have fallen considerably. So companies which would potentially command premium ratings in the US are considerably more attractively priced in Europe.

We think the managers’ balanced approach to style could be attractive given the current uncertainty around the macroeconomic environment. Currently economies are reopening, but the danger of a second wave of COVID-19 remains real, as does the continuing uncertainty surrounding Brexit and trade wars. As such, the trust’s balanced style exposure should make the portfolio less exposed to any one of the possible outcomes from the current situation; including a flight to quality, value outperforming in a cyclical rally, or growth stocks outperforming on low rate expectations.

Although the trust has struggled somewhat over the past year or so, causing the discount to widen, the managers have a very strong long-term track record and they are simply ‘sticking to their guns’. They take the view that it is highly rated companies, which they do not invest in, that have driven returns over the past few years. However, if valuations start getting taken into consideration and performance picks up again over time, we expect the discount to narrow.

bull bear
Unique investment approach, with a portfolio exposed to high-quality, market leading smaller companies Often has high levels of gearing which can cause volatility
Strong long-term performance track record Poor short-term performance as highly rated companies have driven market returns
Current wide discount potentially offers an attractive opportunity to invest A high number of stocks can make it harder to generate alpha
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
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