Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

One of the key attributes to look for when selecting an actively managed fund is whether it has a consistent record of beating its benchmark. A good example is the Fidelity European Trust, which has outperformed in nine of the last ten years, so it is no surprise that it appears in our list of best-selling investment trusts for January and February.  

The fund aims to deliver long-term capital and income growth, mainly by investing in continental European companies. It has been run by Sam Morse since 2011, with Marcel Stötzel appointed co-manager in 2020.

Strategy and portfolio

Fidelity European Trust has built up a strong track record by providing a core defensive exposure to the region’s equities. Its strategy can be summarised as ‘growth at a reasonable price’, where the focus is on high-quality companies with good dividend growth prospects that are trading at attractive valuations.

The managers typically invest in 50-60 stocks and take a long-term view, with over half of the names having been held for at least a decade. At the end of January the ten largest positions accounted for 47.1% of the assets, making it relatively concentrated, although it is well-diversified by sector with the biggest allocations being Financials, Healthcare and Industrials1.

Fidelity European Trust - top 10 holdings

  1. ASML
  2. Novo Nordisk
  3. Nestle
  4. LVMH Moet Hennessy
  5. SAP
  6. TotalEnergies
  7. L’Oreal
  8. Roche Holdings
  9. EssilorLuxottica
  10. Hermes International

Source: Fidelity International, 29.2.24

Outlook for 2024

Morse and Stötzel think that Europe could experience a period of stagflation this year, in which the continent suffers a combination of low economic growth and high inflation. To combat this they have selected stocks that have strong pricing power, while avoiding those with stretched balance sheets2.

The managers are keen to point out that the performance of European companies is not dependent on the region’s economy, with the FTSE World Europe ex UK benchmark having kept pace with the MSCI World Index over the long-term. They continue to believe that equity returns are driven by real dividend growth rather than economic growth2.

How has it performed?

Fidelity European has outperformed its benchmark over the past one, three and five years on an NAV total return basis, with gains of 11.2%, 44.3% and 85.7% respectively. Since inception in 1991 it has grown by almost four times as much as the index, which is a remarkable achievement1. Please remember past performance is not a reliable indicator of future returns.

Additional tools that can boost the returns

The trust uses gearing – borrowing to increase the level of investment – that is fixed at around 12% of net assets. This has been a key contributor to returns historically and it can also sell short to profit from prices that are expected to fall in value.

Is it available at a discount?

Fidelity European Trust is currently available at a 7% discount to NAV, which is broadly in line with the one-year average of 6%. The Board is committed to keeping the figure in single digits in normal market conditions and has been willing to use share buybacks whenever necessary.

How do the costs stack up?

The ongoing charges based on the latest available financial year (2022) were 0.78%, which is reasonable for a successful, actively managed fund.

More on Fidelity European Trust

(%)
As at 25 March
2019-2020 2020-2021 2021-2022 2022-2023 2023-2024
Fidelity European Trust 2.3 30.7 9.5 13.2 21.2

Past performance is not a reliable indicator of future returns

Source: FE, Share price total returns in GBP from 25.3.19 to 25.3.24. Excludes initial charge.

Source:

1 Fidelity International, data to 31 January 2024 
2 Winterflood, 15 February 2024 
 

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Fidelity European Trust invests in overseas investments which will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Shares in the trust are listed on the London Stock Exchange and their price is affected by supply and demand. The trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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