- Manager continues to focus on companies with differentiated products or services and barriers to competition
- A focus on quality growth companies and a number of stock-specific issues held back performance last year
- This approach has proved successful over the long term; we maintain our long-term conviction
2016 presented a change in leadership within the European stock market. Previously-popular growth sectors, such as consumer goods, healthcare and technology, were shunned by investors later in the year in favour of some of the more economically-sensitive areas of the market, such as the financials and commodity-related industries. A focus on the former type of company, along with some stock specific issues, led the Jupiter European Fund to underperform the broader European market over the past year.
We acknowledge all active fund managers go through short-term periods of underperformance and we remain impressed by Alexander Darwall’s longer-term track record. We favour the manager’s longstanding, high-conviction investment approach and focus on companies that he believes could prosper regardless of the wider economic environment.
We view the manager as one of the most skilled stock pickers in the European sector and the fund maintains its place on the Wealth 150 list of our favourite funds across the major sectors.
In terms of individual stocks, the biggest detractor from the fund’s performance was an investment in Leonteq, the Swiss-based provider of specialist investment solutions. According to Alexander Darwall the business has faced a number of challenges, including management problems and slower than expected sales growth. He has since sold this investment from the portfolio.
Shares in Novo Nordisk also struggled after the pharmaceuticals firm announced pricing challenges in the US and the loss of a large contract for one of its best-selling insulin drugs. The manager believes the problems are temporary. He continues to hold the investment in the expectation the company will continue to offer innovative treatments for which consumers are willing to pay. Over the longer term the stock has contributed positively to the fund’s performance.
A number of other investments were successful over the year. Shares in Syngenta, the agriculture and biotechnology company, performed well after a takeover bid for the company was accepted. RELX, the publisher and information provider, was another positive contributor to performance as it continues to successfully build its technology platform.
The fund has delivered an exceptional return over the long term and over the past decade it has grown 174.8%* against 76.9% for the FTSE World Europe ex UK Index. The fund has also been one of the least volatile in its sector over this time, although please remember this should not be viewed as a guide to the fund’s future performance.
|Annual percentage growth|
| Jan 12 -
| Jan 13 -
| Jan 14 -
| Jan 15 -
| Jan 16 -
|FTSE World Europe ex UK||23.6%||11.1%||7.5%||-2.1%||24.4%|
Past performance is not a guide to the future. Source: *Lipper IM to 31/01/2017
Political turmoil; technology developments; changes in regulation; and shifting consumer habits all present challenges for companies to overcome. Change and disruption can present opportunity, however Alexander Darwall continues to seek companies he feels can withstand and benefit from change. He favours those with a differentiated product or service that other companies fail to replicate, and for which consumer demand remains buoyant regardless of fluctuations in the wider economic environment.
The fund is a concentrated portfolio of 39 stocks, which means each investment can have a significant impact on performance although this is a higher-risk approach. A number of the businesses in which the manager invests are in period of transition and are likely to face some shorter-term challenges on the road to longer-term success and the manager is prepared to be patient in the meantime.
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