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Devon Equity Management appointed to manage Jupiter European Opportunities

Jupiter European Opportunities Trust recently released a good set of results for the year to 31 May 2019. The board has also since announced its intention to move the management of the trust to Devon Equity Management.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • NAV total return of 6.4% compared with 1.8% for the trust's benchmark
  • Share price total return of 5.8%
  • Alexander Darwall will launch a new investment management company, Devon Equity Management
  • The board intends to appoint Devon as the trust's investment adviser

We think Alexander Darwall, manager of Jupiter European Opportunities Trust, is a talented stock picker. He looks for something unique in the companies he invests in. They should offer a product or service that other companies find hard to replicate or do better. This means consumer demand could hold up, or get stronger, even if there are problems in the wider economy.

It's an approach that's worked well over the long term, and over the 12 months to 31 May 2019. Over this time the trust's NAV, with dividends reinvested, has beaten its benchmark by 4.6%. Past performance isn't a guide to future returns though. Please note the trust's discount has widened since this point, so the share price has been weaker in recent months.

Annual percentage growth
Sep 14 -
Sep 15
Sep 15 -
Sep 16
Sep 16 -
Sep 17
Sep 17 -
Sep 18
Sep 18 -
Sep 19
Jupiter European Opportunities Trust 22.8% 8.8% 20.2% 27.7% -1.9%
FTSE World Europe ex UK -1.2% 21.1% 22.7% 2.0% 6.4%

Past performance is not a guide to the future. Source: Lipper IM to 30/09/2019

Management change

As announced in July, Alexander Darwall has taken steps to launch a new investment management company, Devon Equity Management. The board has since consulted with shareholders and undertaken comprehensive due diligence into the new firm.

On 2 October, it was announced that, subject to the completion of its due diligence exercise and regulatory approvals, Devon will become the investment adviser to the trust, while FundRock will be the alternative investment fund manager (AIFM). This means Darwall will have discretion over the investments that make it in and out of the portfolio, while FundRock will provide services such as portfolio and risk management.

Following the transition, there will be no changes to the manager's investment philosophy or process.

Fee changes

Jupiter is currently paid an annual base management fee of 0.75% and an annual performance fee of 15% of the outperformance above the benchmark. These fees will continue to accrue and be payable to Jupiter until 31 May 2020, at which point they will cease. The board has also agreed to pay 0.03% to FundRock and a base management fee of 0.10% to Devon from their appointment in November 2019 until 31 May.

From 1 June 2020, Devon and FundRock will be paid an aggregate management fee of 0.90% per year on assets under £1bn and 0.80% per year thereafter, with no performance fee. HL’s platform fee also applies.

Overall, the new fee arrangements should result in a material reduction in fees for the company. We view this as good news for investors and, overall, we're encouraged to hear Darwall will continue to run the trust.

Changes to the board

On 1 August 2019 the board announced the appointment of Sharon Brown as an additional non-executive director. Brown is a qualified accountant and it's expected she'll take over from Philip Best as chair of the audit committee in 2020.

Stock selection drives performance

The trust's success over the year to 31 May comes from a variety of companies.

The best performers include Experian, the consumer credit reporting company, RELX, a leading provider of information and analytics, and Edenred, which offers prepaid corporate services, such as employee benefits.

These businesses each do something different, but one thing they share is their use of digital technologies in their pursuit to become even more successful. It could help expand the reach of their services, and reduce costs.

Like all diversified portfolios, there were some weaker performers too. Ryanair, for instance, faces increased competition in the short-haul airline sector, which is putting pressure on profits, as well as rising costs. It's been a more successful investment over the long term, though Darwall sold the stock during the year.

There were also three key additions to the portfolio: the London Stock Exchange, video game company Ubisoft, and cocoa producer Barry Callebaut.

Overall Darwall invests in a fairly small number of companies, so each one can have a big impact on performance. He can also use gearing (borrowing to invest). Both of these factors increases risk.

Outlook

Darwall knows there are plenty of issues affecting the wider economy at the moment: slower global economic growth, a possible recession in Germany, US/China trade disputes, and Brexit to name a few.

It’s unlikely the companies held in the trust will be completely immune from these headwinds. But Darwall continues to focus on what's going on within individual companies, rather than the wider economy. He looks for companies he thinks could do well, even when the economy is going through a rough patch. We think this gives the trust the best chance of overcoming short-term blips and delivering superior long-term performance.

Details of the current charges, including the performance fee can be found in the annual report and accounts and Key Information Document.

More about this Trust, including charges

Key Information Document

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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