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. In late 2019, JEO followed Alexander to his new fund-management company – Devon Equity Management. The same bottom-up, fundamental investment strategy is applied as has always been. Alexander looks to identify companies that retain high-growth characteristics and profitability longer than the market expects and to hold them for the long term.

Another characteristic of JEO has meant that 2020 has been a standout year for all the wrong reasons. Alexander manages high-conviction, concentrated portfolios. Over the long term this has meant he has delivered strong returns relative to the benchmark and his peer group. However, during 2020 Wirecard (now sold, but until relatively recently JEO’s largest holding) has had a significant negative impact on recent performance.

As we discuss in the Portfolio section, Alexander’s lessons learnt include the recognition that the sizing of the position had clearly been too big given the complex nature of the business, but also that he had placed too much trust in the wrong people in his due-diligence process. Nevertheless, if Alexander had not followed his investment process so rigorously (by selling immediately when the facts as he knew them changed), the impact on performance would have been significantly worse.

Over the long term JEO typically employs gearing. However, as we show in Gearing, it was taken down to zero in May. This represented an overall market de-risking exercise, and indirectly helped mitigate the damage from Wirecard.

The discount has widened to c.10% since June and both the board of JEO and Alexander himself have recently bought in shares at these levels.

Analyst's View

We believe the lessons learnt from the painful Wirecard episode should not obscure the strengths of a strategy which has delivered over the long term. Up until the start of 2020, JEO was far ahead of peers on an NAV total return basis over most time frames.

As we illustrate in the Performance section, Alexander’s stock selection for the rest of the portfolio has been strong over the short and medium term, which means that we believe that the mistakes made over a single stock do not mean that his long-term track record is in any way invalid.

JEO has been de-rated relative to peers which means that, for the first time since 2009, the trust stands on a slightly wider discount than the weighted average for its peer group. This discount has not gone unnoticed by Alexander (who recently invested c. £700k), with the trust’s board subsequently buying shares back for the first time since 2011.

Alexander has a long and consistent track record and he has a very meaningful personal stake in the trust himself. It is our view that Alexander’s investment process (which remains unchanged at Devon) should, over the medium to long term, deliver attractive returns – as it has so clearly done in the past. The discount to peers is therefore unwarranted, and with the board now making purchases of the trust’s own shares, we believe this could be an opportune moment in discount terms for long-term investors.

bull bear
Strong long-term track record Wirecard demonstrates the downside risks of having a highly concentrated portfolio
High-conviction, stock-picking manager who has delivered alpha year in, year out Short-term performance has lagged the benchmark (over one year) due to Wirecard
Pragmatic mandate enables manager to look for best 'European' opportunities Devon Equity Management is a young company
Continue to Portfolio

Fund History

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
We highlight potential opportunities within the European investment trust space…
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…
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...
28 Nov 2018 Every cloud...
The endless grinding negativity of Brexit has driven investors away from Europe in scores, but some managers see rich pickings for those willing to take the risk...
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 fund managers in the UK with similar characteristics...
17 Oct 2018 Fund Analysis
Jupiter European Opportunities (JEO) has delivered a consistently strong performance over the last decade...
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
Our research suggests that fund managers who are willing to back their convictions with punchy bets tend to outperform over the long term...
30 May 2018 Forza Italia!
Recent weeks have seen Italy's rocky relationship with the EU thrust into the spotlight once again, but apart from fresh volatility - how much has really changed?
24 Jan 2018 Fishing in the right pond...
We analyse where active managers have been able to add the most value relative to their benchmark indices...
24 Jan 2018 Fund Analysis
A growth-orientated portfolio of high-quality companies listed across continental Europe and the UK with an almost unrivaled track record of outperformance...
19 Jan 2018 Full steam ahead?
Jupiter Fund of Investment Trusts manager Richard Curling gives his view on the potential risks and rewards for the major equity regions around the world in 2018...
20 Sep 2017 Back to School…
Tim Stevenson, manager of the Henderson Euro Trust, discusses the economic and political backdrop for European equities…
25 Jul 2017 En Garde!
Following a significant reversal in fortunes over the course of 2017, we analyse the outlook for the high-flying European equity market and the trusts that focus on it...
25 Jul 2017 Fund Analysis
One of the top performing trusts in any sector thanks a bottom-up approach and a focus on high-quality companies...
26 Apr 2017 The greatest...
We use technical analysis to identify some of the best stock picking fund managers over the long-term...
03 Feb 2017 Analysis: What next for European ITs?
Our analysis shows that European investment trusts have in recent years delivered strong returns to investors from their current discount, but risks abound in 2017...
24 Nov 2016 Investment trusts vs OEICs: The definitive guide
We take a look at how investment trusts really stack up against their open-ended fund rivals...
23 Nov 2016 Head-to-head: Four trusts that stack up well against their open ended counterparts...
We highlight the trusts that have outperformed their open-ended equivalent in NAV and price terms, have cheaper charges and are trading at wide discounts to their own history...
19 Sep 2016 Europe: A contrarian investor's view...
Political chaos in Europe provides an opportunity to acquire exposure to some of the world’s largest multinationals at a significant discount...
19 May 2016 Six reasons to invest in Europe
Henderson European Focus Trust manager John Bennett is optimistic on the outlook despite the looming referendum...
25 Apr 2016 Fighting spirit
Why investment trusts have been the ultimate recovery play...
26 Nov 2015 Masters of the universe
We use quantitative analysis techniques to highlight five of the best stockpicking managers in the investment companies sector
21 Sep 2015 Investment trust news, research, strategy, analysis...
21 Sep 2015 Terms & Conditions
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