Fidelity European Trust to merge with Henderson European

The proposed merger between Fidelity European Trust and Henderson European Trust has been approved by shareholders, with shares in the new trust scheduled to begin trading on Monday 29 September.  

The enlarged trust will continue to be run by the current management team of Sam Morse and Marcel Stötzel with the same policy and objective. 

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Objective and approach

The Fidelity European Trust invests in attractively valued companies with good prospects for cash generation and dividend growth. It concentrates on high-quality stocks with the aim of consistently outperforming the FTSE World Europe ex UK index by 1% to 2% per annum after fees¹.

Portfolio construction is driven by bottom-up stock selection with a focus on the identification of quality, durable and attractively valued companies with long-term structural growth prospects that can increase their dividends sustainably over the long-term. The managers believe that holdings that can consistently grow their dividends represent healthy businesses with stable earnings growth and strong free cash flows².

When searching for these types of companies, Morse and Stötzel look at four key areas: positive fundamentals, which includes a good track record and a healthy return on capital employed; a robust underlying level of cash generation; a low, manageable level of debt; and attractive valuations³.

What are the managers’ latest views?

The managers believe that the stimulation of the European economy, initiated by the announcement of Germany’s fiscal stimulus package in March 2025, could have a positive impact on the region, particularly as the risk of a trade war with the US threatens to severely impact its goods exports⁴.

“While the impact from tariffs will still be felt, and the full details of such tariffs remain uncertain, it is encouraging that Europe is putting some self-help measures in place. However, the fiscal impact will take time to impact the real economy and the fiscal stimulus initiatives will not be implemented all at once, particularly in the areas targeted by the German government’s spending plans⁵.”

Despite the year-to-date rally in the region’s stock markets, European companies still trade on a valuation discount relative to their US counterparts and there is some way to go before they return to historic median levels⁶.

The underlying portfolio

Fidelity European has a fairly concentrated portfolio of 40 to 50 stocks and they are typically held for a period of three to five years. At the end of July, the ten largest positions accounted for 40.9% of the assets and the top twenty 69.8% compared to 20.8% and 33% for the benchmark⁷.

Fidelity European Trust top 10 holdings

1. Roche Holding
2. ASML Holding
3. SAP
4. L’Oreal
5. TotalEnergies
6. Nestle
7. Legrand
8. Assa Abloy
9. Intesa Sanpaolo
10. AXA

Source: Fidelity European Trust PLC factsheet, 31 July 2025

There is no top-down bias in favour of a particular sector or country as the managers mainly look to add value via their stock selection decisions. These tend to be of the order of magnitude of 2.6% to 3.3% for the largest overweights relative to the index⁸.

Another point of note is the net gearing (borrowing to invest), which currently stands at 12.2%. This has the effect of magnifying the potential gains and losses and is one of the key differences between an investment trust and an open-ended fund, which is not allowed to borrow⁹.

Performance, dividends and discount

Over the five years to the end of July the trust generated share price cumulative growth of 76.4% compared to 69.4% from the index. The long-term record is even more impressive, as the increase of 6,394.9% since the performance commencement date of fifth November 1991 is massively ahead of the 1,805.5% change in the benchmark¹⁰. Please remember past performance is not a reliable indicator of future returns.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Before investing, please read the relevant key information document which contains important information about each investment trust. The shares in Fidelity European Trust PLC are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. Overseas investments 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. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. 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.