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.

The best-selling investment trust on the Fidelity Personal Investing platform in May was the Fidelity European Trust, which has benefitted from the rotation away from the US triggered by President Trump’s tariff polices. This represents an important change in sentiment that Andrew Oxlade recently examined in more detail

One of the main advantages of the fund is that it offers a core defensive exposure to European equities, which are significantly cheaper than their American counterparts. Another attraction is the strong performance record that has been built up under lead manager Sam Morse, who has made good use of Fidelity’s considerable research capability in the region.1

Approach

The Fidelity European Trust invests in high quality companies with good dividend growth prospects that are trading on attractive valuations. It has a quality growth bias that gives it good defensive characteristics.2

Morse’s co-manager, Marcel Stotzel, says that their investment approach is to prioritise bottom-up stock selection as the primary driver of returns, rather than making top-down calls or sector allocation bets. 

“Long-term macroeconomic developments remain unpredictable so we continue to focus on identifying companies with sustainable dividend growth, which should provide resilience in uncertain markets and deliver outperformance over the medium to long term.”

The underlying portfolio

The managers look for companies based on their prospects for producing dividends and dividend growth, as these are good indicators of steady structural growth. In order to do this they focus on four key areas: positive fundamentals, the ability to generate cash, a manageable level of debt, and an attractive valuation.3 

It is a fairly concentrated portfolio of 50 to 60 stocks1 with the top 10 positions at the end of April accounting for 42.1% of the assets. The typical holding period is 3 to 5 years and there is no bias to a particular sector or country as they mainly look to add value via their stock selection decisions.

Fidelity European Trust top 10 holdings

1.    SAP
2.    Roche
3.    ASML 
4.    Nestle 
5.    L’Oreal
6.    Novo Nordisk
7.    TotalEnergies
8.    Deutsche Borse
9.    Legrand
10.  Essilorluxottica

Source: Fidelity European Trust factsheet, 30 April 2025

What are the managers’ latest views?

Stotzel says that Trump’s various policy announcements and tariffs have had a profound impact on investor sentiment and threaten to diminish demand and reduce corporate margins, especially for companies lacking pricing power.5 

“However, from a longer-term perspective, the shift in US policies regarding security and trade have potentially given Europe a wake-up call that will result in greater unity and policy coordination across the continent. Furthermore, the European market continues to trade at a significant valuation discount to the US, presenting an attractive investment opportunity.”

Performance, dividends and discount

Over the 5 years to the end of April the share price cumulative growth was 87.1%, which was comfortably ahead of the 79% achieved by the fund’s FTSE World Europe ex-UK benchmark. The shares are currently yielding 2%. Please note this yield is not guaranteed.6
 

Unlike many investment trusts, the discount to NAV is a modest 3% with the recent strong demand helping to close it from the 12-month average of 6%. The Board is committed to maintaining the figure in single digits in normal market conditions.7

How do the costs stack up?

The latest ongoing charges figure is 0.77%, which is reasonable for an actively managed regional mandate.

Proposed combination 

A proposed combination has recently been announced that would involve the voluntary winding up of the Henderson European Trust with its assets rolled over into Fidelity European. The plan requires approval by both sets of shareholders and if it goes ahead could result in an additional £420m or more of funds taking the latter past the £2bn mark. 

Morse says that he is really excited by this opportunity to take the Fidelity European Trust to the next level and create the true ‘flagship’ investment trust for investing in European equities. “By employing a consistent investment approach, we are confident that we will continue to provide shareholders with steady outperformance of the benchmark.”

A lower tiered management fee will be introduced as part of the proposals that could see the ongoing charges figure fall to around 0.68%. Fidelity will also make a significant contribution to the costs of the merger, which is expected to fully offset the direct transaction costs, such that existing shareholders should not suffer any NAV dilution.

 

(%)

As at 19 June
2020-2021 2021-2022 2022-2023 2023-2024 2024-2025
Fidelity European Trust 20.5 -7.7 30.7 14.5 5.2

Past performance is not a reliable indicator of future returns
Source: FE, share price returns from 19.6.20 to 19.6.25. Excludes initial charge.

Source:

1,2,7 Winterflood, 2025 Recommendations, 9.1.25 
3,4,6,8 Fidelity European Trust, factsheet 30.4.25 
5 AIC, 2.6.25
 

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 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

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