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Fund Profile

JPMorgan European Discovery 21 February 2023

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
JEDT offers core European smaller companies exposure with an adaptable and flexible investment approach, possibly suited to a changing investment landscape…
Overview

JPMorgan European Discovery (LON:JEDT) provides core exposure to European smaller companies, an asset class which has generated impressive long-term returns. JEDT’s investment approach has long combined fundamental research and human judgement, using dispassionate quantitative data and analysis to form opinions, based on three principal factors: Value, Quality and Momentum. In recent years, JEDT’s quantitative analysis has begun to include machine learning systems that can analyse large quantities of unstructured data, for example, reading and scoring the transcripts of hundreds of company results’ presentations for positive or negative statements. But, as ever, these are still tools for the human fund managers to use to help make better-informed decisions, rather than being decision-makers in their own right.

JEDT’s management team has been very stable over many years, with Francesco Conte at the helm for 24 years and his co-manager, Ed Greaves, for 11 years. The same pattern of long-term stability is evident across the JPMorgan Asset Management UK and European Smaller Companies teams, with long tenure more common than not. Thus, the team today are responsible for JEDT’s long-term outperformance and have been instrumental in developing the processes and systems that support their ultimate judgements.

JEDT trades at a c. 14% discount at the time of writing, which is a little wider than its long-term average discount and, after a period of no gearing, has recently introduced a modest 10% level of gearing, which the team say is an indication of their increased optimism for the Portfolio.

Analyst's View

European smaller companies have been one of the best performing equity categories over long periods of time. JEDT has a very long track record of capturing and exceeding this. The team’s use of a mixture of fundamental research, for which read ‘human’, and machine leaning, provides investors with a portfolio informed by experienced fund managers but with an unemotional extra input that avoids attachment to current holdings and provides consistent analysis of the factors that the human side of the equation looks for. In our recent conversation with Ed Greaves, Francesco’s co-manager, he was keen to emphasise that this is a practical tool providing decision-making information for the fund managers, rather than an artificial intelligence system making the decisions. A lot of time has been spent in recent years in trying to understand how humans make decisions in investment and we know that investors tend to place greater faith in stocks they own, than those they don’t. We think having a series of non-human tools to constantly assess that faith can only be helpful to an open-minded fund manager.

Smaller companies often bear the brunt in a market and economic downturn. Investors keep coming back to them in the end because they are often faster to adapt and innovate. Europe, as a whole, is a large market, and smaller companies are often international leaders in niches that exist below the global super-sectors, such as energy or pharmaceuticals. JEDT operates at this end of the smaller companies’ universe, rather than at the truly microcap end, which is a different specialism. The long-term results speak for themselves. At its current 14% discount, JEDT is, in our view, a good value way to gain long-term exposure to an asset class with the capability to rapidly adapt to an economic landscape that may well be very different to the one we have grown accustomed to.

Bull

  • An asset class with excellent long-term performance
  • An experienced team with long tenure and a wide range of tools to help in investment decisions
  • European small caps are valued at a discount to large caps

Bear

  • Smaller companies can be a higher-risk asset class
  • A prolonged economic downturn is unlikely to be positive for small caps
  • JEDT’s gearing can amplify returns but also exacerbate declines
Continue to Portfolio

Fund History

15 May 2024 Why'd you have to go and make things so complicated?
European growth may be more complicated, and positive, than we suspected...
24 Apr 2024 Is ESG finished?
Two of our analysts debate whether it’s time to give up on ESG…
21 Jun 2023 Ça plane pour moi
Some of the world's biggest companies are doing just fine in Europe, yet investors shun the region. Time for a rethink...
21 Feb 2023 Fund Analysis
JEDT offers core European smaller companies exposure with an adaptable and flexible investment approach, possibly suited to a changing investment landscape…
12 Oct 2022 The Buck stops where?
The US dollar has surged in 2022, but many are questioning whether this can be sustained...
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
We highlight potential opportunities within the European investment trust space…
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…
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, but some managers see rich pickings for those willing to take the risk...
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 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 high conviction European smaller companies portfolio managed by a team which has generated sector beating returns...
08 Nov 2017 Straight talking...
Bronwyn Curtis OBE, chairman of JPMorgan Asian, tells us why making the tough decisions and addressing the elephant in the room are her forte...
25 Jul 2017 Fund Analysis
A trust focused on smaller European small-caps managed via a bottom-up, benchmark-agnostic approach...
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