A significant breakthrough in US-China trade relations has sent ripples through global markets, with European equities experiencing notable gains. The agreement to suspend and reduce tariffs has not only alleviated immediate trade tensions but also sparked renewed confidence among investors, particularly in sectors previously burdened by the trade war.
Over the weekend, the United States and China reached a consensus to implement a 90-day suspension on their respective tariffs, marking a substantial de-escalation in their ongoing trade dispute. Under this agreement, the US will reduce tariffs on Chinese imports from 145% to 30%, while China will lower its tariffs on US goods from 125% to 10%. This development has been met with enthusiasm across global financial markets.
European stock markets responded positively to the news. Germany’s DAX index climbed 1.8%, France’s CAC 40 rose 1.3%, and the UK’s FTSE 100 increased by 1% in early trading. The optimism was particularly evident in sectors previously affected by the tariffs. European logistics companies, such as Maersk and Hapag-Lloyd, saw their shares surge by over 10%, reflecting expectations of increased trade volumes.
The MedTech sector also experienced a boost. Companies like Philips, Siemens Healthineers, and Carl Zeiss Meditec reported share price increases ranging from 4% to 5%. Analysts attribute this to the anticipated reduction in supply chain costs and improved profitability resulting from the eased trade restrictions.
However, not all sectors shared in the gains. Pharmaceutical stocks faced pressure following President Trump’s announcement of plans to lower drug prices in the US by up to 80%. This policy shift led to declines in shares of major pharmaceutical companies, including AstraZeneca and GSK.
Beyond equities, the trade agreement influenced other financial markets. Oil prices rose, with Brent crude increasing by 2.1% to $65.27 per barrel, and West Texas Intermediate crude climbing by 2.1% to $62.29 per barrel, driven by expectations of heightened demand. Conversely, gold prices fell as investors shifted away from safe-haven assets amid the improved trade outlook.
While the 90-day tariff suspension offers a temporary reprieve, it sets the stage for further negotiations aimed at achieving a more comprehensive trade agreement. Investors remain cautiously optimistic, recognising that sustained progress in US-China trade relations could have lasting positive effects on global markets.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
Investor attention has turned sharply positive as hopes of a breakthrough in US-China trade negotiations drive European markets higher. This renewed optimism is setting the stage for potential long-term gains as the world’s two largest economies edge closer to easing the tariffs that have weighed on global trade for years. Market participants are positioning themselves ahead of what could be a pivotal shift in the international economic landscape.
European stocks surged in early trading, led by a 0.3% rise in the pan-European STOXX 600 index. Germany’s DAX outperformed its regional peers, climbing by 0.7%, supported by strength in the energy and raw materials sectors. Both sectors posted the strongest gains of the session as investors bet on increased global demand if trade barriers are relaxed. Sentiment was further buoyed by encouraging comments from US officials suggesting that while many tariffs may remain in place for now, new trade frameworks aimed at reducing economic friction are under serious consideration.
Adding to the market’s enthusiasm, corporate earnings from major European firms exceeded expectations. One of Germany’s largest banks surprised investors with a 12% rise in first-quarter net profits, beating market forecasts and strengthening its strategic position as it navigates ongoing merger interest. This result highlighted the resilience of Europe’s financial sector, offering reassurance that companies are capable of delivering value even in complex economic conditions.
Across the English Channel, the UK market continued its impressive rally, extending one of its longest winning streaks in recent history. Investor sentiment in London was lifted by the announcement of a new trade agreement with the United States. The deal includes tariff reductions on a range of key exports, providing fresh momentum for British businesses seeking to expand their reach in North America. Meanwhile, the British pound approached its highest level against the US dollar in more than three years, further reflecting investor confidence in the UK’s economic outlook.
China also delivered a positive surprise, reporting stronger-than-expected export figures for April. Exports grew by over 8% year-on-year, defying concerns that heightened tariffs would derail the country’s manufacturing and trade performance. While imports showed a slight decline, the overall resilience in China’s external trade sector added to the global market’s growing sense of optimism.
Investors are now watching closely as US and Chinese officials continue their high-level discussions. Any concrete steps toward reducing tariffs or improving trade cooperation are likely to unleash further market gains. The stakes are high, but so is the potential for unlocking new opportunities across sectors ranging from manufacturing to financial services. This wave of renewed confidence comes at a time when investors are seeking clarity and direction in an increasingly interconnected world.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
Despite escalating global trade tensions and political uncertainty, European equities have demonstrated remarkable resilience, with the STOXX Europe 600 index achieving its longest streak of gains since 2021. Investors are navigating a complex landscape shaped by U.S. tariff policies, yet the European market’s performance suggests underlying strength and adaptability.
In the face of U.S. President Donald Trump’s recent imposition of a 100% tariff on foreign-made films and threats of additional levies on pharmaceuticals, European markets have shown surprising buoyancy. The STOXX Europe 600 index rose slightly by 0.1% on Monday, surpassing its April 2 level for the first time since the announcement of reciprocal tariffs. This uptick is notable, especially considering the closure of London markets for a bank holiday and the general atmosphere of caution among investors.
Corporate earnings have played a significant role in bolstering market confidence. European firms are reporting earnings significantly ahead of expectations, with earnings growth of 3.8% so far, outpacing pre-season estimates. Notably, UBS reported a 32% increase in revenues within its global markets unit, attributing this growth to gains from market volatility spurred by tariff announcements. Similarly, Barclays experienced a 19% jump in pre-tax profit, revising its 2025 income forecast upward due to robust performance in its trading operations.
However, the broader economic landscape remains complex. Germany’s DAX index fell by 1.6% following conservative leader Friedrich Merz’s failure to secure a parliamentary majority, delaying the formation of a new coalition government. This political uncertainty, coupled with ongoing concerns about U.S. tariff policies, has contributed to a cautious investor sentiment.
In the UK, business activity declined in April for the first time since October 2023, driven by weakening global trade conditions and heightened tariff tensions. The S\&P Global UK Services PMI dropped to 49.0, and the Composite Output Index fell to 48.5, both signalling contraction. Export orders saw the steepest decline since February 2021.
Despite these challenges, certain sectors are exhibiting resilience. Consumer staples, utilities, and technology sectors are highlighted as areas with inherent strengths or market undervaluation, potentially offering stability amid the broader market volatility.
Looking ahead, investors are closely monitoring upcoming interest rate decisions by the U.S. Federal Reserve and the Bank of England, as well as potential developments in U.S.-China trade negotiations. The European market’s recent performance underscores its capacity to adapt and thrive, even amid global economic headwinds.
The European stock market has demonstrated resilience in the face of escalating global trade tensions and political uncertainties. Strong corporate earnings, particularly in the banking sector, have contributed to the market’s positive performance. However, challenges persist, including political instability in Germany and declining business activity in the UK. Investors are advised to remain vigilant, focusing on sectors with inherent strengths and monitoring upcoming economic policy decisions.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
European shares moved higher on Tuesday as confidence grew among investors reviewing a robust wave of corporate earnings, while also keeping a close watch on global trade developments and upcoming economic reports. The pan-European STOXX 600 index posted a 0.2% rise by mid-morning, buoyed by particularly strong performances in the banking sector.
London-based banking heavyweight HSBC impressed markets with a $3 billion share buyback programme, lifting its shares by 2.5%. Germany’s Deutsche Bank saw an even greater boost, with shares advancing 2.7% following a striking 39% jump in first-quarter profits. These figures highlight not only solid financial management but also the resilience of Europe’s banking institutions amid ongoing economic uncertainty.
Analysts pointed to the encouraging nature of the earnings season so far, which reflects a trading environment largely unaffected by the looming threat of new tariffs. Jochen Stanzl, chief market analyst at CMC Markets, noted the cautious optimism permeating the market, emphasising that while uncertainty lingers, there is palpable hope that diplomatic solutions on trade will prevail.
In the background, developments from the United States offered additional stability. The administration confirmed plans to mitigate the effect of new automotive tariffs, ensuring that domestic manufacturers will not be disproportionately burdened by overlapping duties. This move has been interpreted as a step towards preserving the momentum of global trade, further bolstering investor sentiment.
Recent weeks have seen markets stabilise, supported by constructive signals in U.S.–China trade discussions. Nevertheless, a full resolution remains elusive, keeping market nerves slightly frayed. Despite this, the European benchmark STOXX 600 appears poised to weather a second monthly decline with notable resilience, supported by positive earnings momentum.
Adding a note of caution, European Central Bank board member Piero Cipollone warned that any escalation into a full-scale global trade war would deliver a severe economic blow to all participants. This served as a reminder that while opportunities abound, vigilance remains crucial.
On a more granular level, regional performances varied. Germany’s DAX rose 0.5%, demonstrating underlying strength in Europe’s largest economy, even as the French CAC 40, Spanish IBEX 35, and London’s FTSE 100 experienced slight declines between 0.1% and 0.7%.
Individual company results painted a mixed picture. Capgemini surged by 7.4% after posting higher first-quarter revenues, showing robust demand for its IT consulting services. Conversely, BP saw its shares dip by 3.5% after its quarterly profit fell short of expectations, while AstraZeneca dropped 4.4% following disappointing revenue figures and the prospect of a regulatory fine in China.
Meanwhile, Porsche faced a 4.9% fall after cutting several 2025 forecasts, demonstrating that even luxury brands are not immune to shifting economic tides.
Investors are now turning their attention to vital economic indicators, including the euro zone consumer confidence survey and inflation data from both the euro zone and the United States, due later this week. These results could provide critical clues about the health of the global economy and the next moves for financial markets.
European markets are clearly navigating a complex environment of hope and caution. The combination of strong corporate performance and evolving trade policies continues to create rich opportunities for savvy investors ready to act decisively.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
European equity markets experienced a significant uplift on Wednesday, driven by robust earnings from SAP and a notable shift in US policy rhetoric. The German software titan’s impressive performance, coupled with US President Donald Trump’s softened stance on Federal Reserve leadership and trade tariffs, provided a dual boost to investor confidence.
SAP’s shares soared by 10.6%, marking their most substantial single-day gain in six years. This surge followed the company’s announcement of a €2.5 billion adjusted operating profit for Q1 2025, surpassing analyst expectations of €2.22 billion. The growth is attributed to heightened demand for SAP’s cloud-based solutions, particularly those integrating artificial intelligence, leading to a projected annual cloud revenue between €21.6 billion and €21.9 billion. This momentum has effectively doubled SAP’s stock value over the past two years.
The positive sentiment extended across European markets, with the STOXX 600 index climbing 1.8%. Germany’s DAX index outperformed, rising by 3.1%, while France’s CAC 40 and the UK’s FTSE 100 saw gains of 2.5% and 2.2%, respectively. Investors were further encouraged by President Trump’s clarification that he had no intention of dismissing Federal Reserve Chair Jerome Powell, alleviating concerns over the Fed’s independence. Additionally, indications of potential reductions in tariffs on Chinese imports signalled a possible easing of US-China trade tensions.
In the technology sector, BE Semiconductor Industries experienced a nearly 9% increase in share value, driven by strong AI-related demand. The energy sector also saw positive movement, with BP’s shares rising 4.6% following activist investor Elliott’s increased stake in the company. Conversely, Reckitt’s shares declined by 5.1% after the company reported lower-than-expected sales growth.
Despite the market rally, underlying economic concerns persist. Eurozone PMI data indicated a contraction in private sector activity, and European companies are projected to report a 3.5% decline in Q1 earnings, marking the weakest performance in two years. These factors suggest that while investor sentiment has improved, caution remains warranted.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
JPMorgan European Discovery Trust plc (LON:JEDT) has announced its March commentary.
Month in review As of 31/03/2025
The Trust outperformed the benchmark over March.
Positive contributors to relative returns included stock selection in industrial support services and construction and materials.
Detractors included stock selection in media and stock selection and an overweight position in pharmaceuticals and biotechnology.
At the stock level, our overweight in Bilfinger, the German industrial service provider, contributed to performance over the month following German election results that led to a rally of German stocks being given hopes of increased stimulus packages. Additionally, Bilfinger reported strong Fiscal Year (FY) 2024 and fourth-quarter results at the beginning of March, alongside FY 2025 guidance that points towards continued margin improvements.
An overweight position in SPIE, the technical services provider, also contributed to relative returns after the company reported positive full year results, with earnings ahead of expectations driven by organic growth and continued margin progress. The company also issued ambitious guidance for 2025-2028, including a target of 3-4% organic growth per annum.
Our overweight position in DO & CO, the Austrian airline and event catering business, detracted from performance given worries around weakness in US air travel. Several US airlines have issued profit warnings, brought on by unfavourable weather and a softer macroeconomic environment that is dampening demand.
Our overweight position in Bonesupport, the healthcare company specialising in orthobiologics, also detracted relatively, given a combination of profit-taking after a strong performance, foreign exchange (FX) effects, and tariff risks.
Looking ahead As of 31/03/2025
Europe has been galvanised into action with meaningful fiscal support, which could boost growth prospects for years to come. Underneath the geopolitical noise, it is clear the fabric of the global economy is changing, with significant consequences for the distribution of growth and potentially, inflation.
European equities trade on an extreme discount to US equities. This argument may not be new to prospective investors; however, the European equity market today can offer comparable levels of quality and growth potential. This valuation support is recognised by European CEOs, who are buying back more stock than ever before.
Technology adoption, healthcare innovation, emerging market consumption and climate change remain the key mega forces behind our secular themes. In 2025, we believe the biggest influencer on opportunity in this part of our portfolio will be AI.
Looking ahead, improving economic conditions, attractive fundamentals and structurally improving interest rates are likely to present investors with many attractive opportunities across markets.
JPMorgan European Discovery Trust is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
Relief swept through European tech markets as the U.S. eased tariff pressures on electronics from China, sending a jolt of optimism through semiconductor and hardware suppliers. With exclusions granted on key product categories including smartphones and computers, investors poured into European tech, anticipating improved access to the world’s largest consumer market. But with new U.S. tariffs still looming, the momentum comes with a dose of caution.
Shares across Europe’s technology sector surged after the U.S. government temporarily exempted several high-value electronics from steep tariffs, offering a breather to companies exposed to U.S. demand. This exemption, which primarily benefits imports from China, had an immediate effect on European semiconductor players whose fortunes are tightly linked to the American consumer and electronics industries.
According to Equita analyst Alberto Gegra, the exclusion of smartphones, computers, and select electronics from the worst-case tariff scenario temporarily lifts a significant weight off the sector. With some tariffs originally expected to exceed 100%, this move avoids a full-scale disruption of supply chains feeding into the U.S. electronics market. The result was a wave of gains across semiconductor and tech hardware shares.
Among the biggest winners were ASM International, Infineon, and ASML — all major contributors to the semiconductor ecosystem and heavily reliant on the U.S. as a sales destination. These stocks climbed between 2.6% and 3.5% in early Monday trading. ASML, a global leader in photolithography machines used to manufacture chips, particularly benefited from its equipment being excluded from the Trump-era 10% baseline tariff.
The ripple effect of the decision wasn’t limited to Europe. U.S. tech giants listed in Frankfurt also jumped. Apple shares spiked over 6% at one point, while Nvidia advanced more than 3%. Dell Technologies, another bellwether of global hardware supply chains, gained 6.3%, signalling confidence in a near-term recovery of cross-border tech trade.
Europe’s broader tech index rose 2.8%, clawing back a portion of the nearly 10% it lost over the past week amid escalating trade concerns. The rally extended beyond chipmakers. Logitech, the computer peripherals manufacturer, posted an impressive 7% gain. SAP, Europe’s largest tech company by market capitalisation, rose 2%, reinforcing the breadth of investor optimism.
Nasdaq futures also reflected renewed confidence, ticking up 1.6% in early European trading, further underscoring the global implications of the tariff easing.
Still, geopolitical risk continues to cloud the outlook. President Trump has warned that additional levies targeting semiconductors and their supply chains are imminent. Commerce Secretary Howard Lutnick echoed that sentiment, confirming that new duties covering both chips and the previously exempt electronics could be introduced within two months. This suggests that while markets have welcomed the pause, the underlying tension remains unresolved.
The current relief in tech stock valuations may prove temporary if fresh tariffs land as anticipated. Yet for now, the market is taking a measured sigh of relief, betting that global supply chains can continue moving uninterrupted in the short term. For Europe’s high-exposure tech firms, every moment without new barriers is a chance to strengthen position and capitalise on global demand.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
After enduring a series of sharp declines, European markets exhibited a strong recovery, demonstrating resilience in the face of ongoing tariff disputes. The pan-European STOXX 600 index surged by 2.7%, marking its most significant single-day gain since November 2022. This uptick follows a period of heavy selling, where the index had plummeted over 12% across four consecutive sessions, reaching a 14-month low.
The rebound was notably led by the aerospace and defense sectors, with companies such as Rolls-Royce and BAE Systems experiencing substantial gains. Financial institutions also contributed to the upward momentum, reflecting a broader market optimism despite the looming threat of a global trade war.
Investor sentiment was buoyed by the European Commission’s proposal of counter-tariffs on a range of U.S. goods. This strategic move is part of the European Union’s efforts to navigate the challenges posed by the U.S.’s sweeping tariffs on imports, including a 20% levy on European products. The Commission also extended an olive branch by offering a “zero-for-zero” tariff deal to Washington, aiming to de-escalate trade tensions and foster a more stable economic environment.
Market analysts suggest that this resurgence indicates a recalibration of investor expectations, as they adjust to the evolving landscape of international trade policies. While volatility remains a concern, the current market dynamics reflect a cautious optimism, with stakeholders closely monitoring policy developments and their potential impact on economic growth.
In the broader context, the European Central Bank’s monetary policy decisions are under scrutiny. With the recent dip in German inflation rates to 2.3%, there is mounting speculation about potential interest rate cuts aimed at stimulating economic activity. Such measures could provide additional support to the markets, reinforcing the positive trajectory observed in recent sessions.
As the situation unfolds, investors are advised to remain vigilant, considering both the opportunities presented by the market’s resilience and the risks associated with ongoing trade disputes. The interplay between policy responses and market reactions will be critical in shaping the economic landscape in the coming months.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
JPMorgan European Discovery Trust plc (LON:JEDT) targets capital growth through investing in smaller continental European equities. The trust is managed under the principles of value, quality, and momentum, with the team managing JEDT having access to large teams of traditional analysts and data scientists.
Over the last five years , JEDT’s NAV total return of c. 82% is ahead of the benchmark’s c. 75% total return and slightly behind the peer group’s NAV total return of c. 90%. Shorter term, JEDT’s NAV TR is ahead of the benchmark and peer group over one year, and over ten years, JEDT’s NAV TR of c. 133% is a good reminder of the potential for high returns from small-caps, being ahead of the benchmark, c. 125%, and the large-cap equivalent index, c. 109%.
Since March 2024 JEDT has been managed by Jules Bloch, Jack Featherby and Jon Ingram. The new team continues with the same high-level investment approach as before, with some refinements to risk control and greater analysis of decision-making. Smaller companies made positive returns over the last few years, but the team’s view is that European smaller companies continue to trade at historically attractive valuations that could be the source of significant returns.
JEDT’s Discount, c. 8% at the time of writing, has narrowed significantly compared to the five-year average of c. 13%. Since 2023, JEDT’s board has spent c. £167m on buybacks, including a tender offer in September 2024 returning £104m to shareholders at a 2% (plus costs) discount. In the Discount section, we look at some of the contributory factors in JEDT’s peer group that have played a role in narrowing the discount.
JPMorgan European Discovery Trust primarily targets capital growth and its yield, 2.1%, can be viewed as an outcome rather than an objective of the strategy, and investors should not necessarily expect a progressive dividend.
JPMorgan European Discovery Trust (LON:JEDT), investment trust targeting european investing 2025, has published its month in review as of 28/02/2025.
Month in review as of 28/02/2025
The trust outperformed the benchmark over February.
Positive contributors to relative returns included stock selection in travel and leisure and pharmaceuticals and biotechnology.
Detractors included an underweight position in industrial metals and mining, and an overweight position in life insurance.
At the stock level, our overweight position to Bilfinger, the industrial services provider, contributed to performance over the period given strong operational momentum and a rally of German domestic stocks following election results.
Our overweight position to Heijmans, the fifth largest construction company in the Netherlands, also contributed to performance over the period following strong fiscal year 2024 results that beat consensus expectations and guidance. Strong momentum is expected to continue in 2025.
Conversely, our overweight position in Vopak, the independent tank terminal operator, detracted from performance over the period following fourth-quarter results that missed expectations, although they were impacted by several one-offs.
Our overweight position in Fluidra, the pool equipment supplier, also detracted from performance over the period due to concerns about the impact of US tariffs on China and Mexico. Fluidra is significantly exposed to these impacts as approximately 50% of US-sold products originate from Mexico, and a further 10-15% from China.
Looking ahead as of 28/02/2025
European equities trade on an extreme discount to US equities. This argument may not be new to prospective investors; however, the European equity market today can offer comparable levels of quality and growth potential. This valuation support is recognised by European CEOs, who are buying back more stock than ever before.
Technology adoption, healthcare innovation, emerging market consumption and climate change remain the key mega forces behind our secular themes. In 2025, we believe the biggest influencer on opportunity in this part of our portfolio will be AI.
We believe the disinflationary trend is likely to continue, alleviating some pressure on central banks, which have adopted a measured approach to interest rate adjustments.
Looking ahead, improving economic conditions, attractive fundamentals and structurally improving interest rates are likely to present investors with many attractive opportunities across markets.
JPMorgan European Discovery Trust is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
JPMorgan European Discovery Trust (LON:JEDT), investment trust targeting european investing 2025, has published its month in review as of 31/01/2025
Monthly as of 2025/01/31
The Trust underperformed the benchmark over January.
Positive contributors to relative returns included stock selection in travel & leisure and industrial transportation.
Detractors included stock selection and an overweight position in pharmaceuticals and biotechnology and stock selection in construction and materials.
At the stock level, an overweight position to CTS Eventim, Europe’s largest ticketing company, contributed to performance given continued strong operational momentum and the expectation of healthy demand for upcoming tours.
An overweight to De’Longhi, a leader in small domestic appliances with a focus on coffee and cooking also contributed to performance following the announcement of a EUR 60 million share buyback programme, as well as a strong beat on fourth-quarter revenues.
Conversely, an overweight position to Bonesupport, a healthcare company specialising in orthobiologics, detracted from performance given the death of a patient following the unauthorised and incorrect use of a Bonesupport product. We do not see this as a risk to the investment case and maintain Bonesupport as one of our highest conviction holdings.
An overweight position to BFF, an Italian bank, also detracted from performance given the release of a negative research report highlighting the potential for the Bank of Italy’s ban on dividends to continue into 2026, as well as the weakness in the factoring business and loan growth.
Looking ahead as of 2025/01/31
European equities trade on an extreme discount to US equities. This argument may not be new to prospective investors; however, the European equity market today can offer comparable levels of quality and growth potential. This valuation support is recognised by European CEOs, who are buying back more stock than ever before.
Technology adoption, healthcare innovation, emerging market consumption and climate change remain the key mega-forces behind our secular themes. In 2025, we believe the biggest influencer on opportunity in this part of our portfolio will be AI.
We believe the disinflationary trend is likely to continue, alleviating some pressure on central banks, which have adopted a measured approach to interest rate adjustments.
Looking ahead, improving economic conditions, attractive fundamentals and structurally improving interest rates are likely to present investors with many attractive opportunities across markets.
JPMorgan European Discovery Trust is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
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UK-listed investment funds provide a variety of options for investors looking to diversify their portfolios. From high-yielding REITs to growth-focused international funds, the articles above offer valuable insights into market trends and investment opportunities. Explore these articles to gain a deeper understanding of how listed funds could fit into your investment strategy.
JPMorgan European Discovery Trust (LON:JEDT), investment trust targeting european investing 2025, has published its month in review as of 31/12/2024.
Month in review as of 31/12/2024
The trust outperformed the benchmark over December.
Positive contributors to relative returns included stock selection and an overweight position in household goods and home construction, and stock selection in pharmaceuticals and biotechnology.
Detractors included stock selection in real estate investment & services development and construction & materials.
At the stock level, an overweight allocation to DO & CO, the hospitality service provider, contributed to relative returns over the month. DO & CO released second-quarter results that significantly beat consensus, leading to upgrades in expectations. This was followed by the extension of a major contract within the international event catering segment.
An overweight allocation to Cairn Homes, the Irish homebuilder, also contributed to relative returns over the month. Cairn Homes demonstrates continued strong operational momentum as demand for housing continues to exceed supply.
Conversely, an overweight allocation to TAG Immobilien, the German real estate company, detracted from relative returns over the month. This was due to what we assume to be profit taking at year-end.
An overweight allocation to Arcadis, the management, consultancy, design and engineering services provider, also detracted from relative returns over the month. This is due to profit taking following a year of strong performance.
Looking ahead as of 31/12/2024
European equities trade on an extreme discount to US equities. This argument may not be new to prospective investors but the European equity market today can offer comparable levels of quality and growth potential. This valuation support is recognised by European CEOs, who are buying back more stock than ever before.
Technology adoption, healthcare innovation, emerging market consumption and climate change remain the key mega forces behind our secular themes. In 2025, we believe the biggest influencer on opportunity in this part of our portfolio will be artificial intelligence (AI).
Looking ahead, improving economic conditions, attractive fundamentals and structurally improving interest rates are likely to present investors with many attractive opportunities across markets.
JPMorgan European Discovery Trust is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
JPMorgan European Discovery Trust plc (LON:JEDT) has announced its November commentary.
Month in review
As of 30/11/2024
The trust underperformed its benchmark in November. However, JEDT’s 1 year cumulative performance is 12.71% versus 5.55% for JEDT’s benchmark index, MSCI Europe ex UK Small Cap Index (Net).
Positive contributors to relative returns included stock selection in travel & leisure and industrial transportation.
Detractors included stock selection in construction & materials and stock selection and an overweight position in electronic & electrical equipment.
At the stock level, an overweight position in Do & Co, an Austrian airline and live-event caterer, contributed after it reported very strong results as the company continued to gain market share.
An overweight position in Saipem, an Italian oil services company, also contributed to relative returns. Its shares continued to move higher in November following a strong quarterly update at the end of October, at which point management increased earnings guidance, prompting upgrades to consensus estimates. Saipem also announced a sizeable contract win in Indonesia towards the end of the month, providing increased visibility on outer-year earnings forecasts.
Conversely, an overweight position in CTS Eventim, a German-headquartered live-event online ticket seller, detracted from relative returns. The company announced an unexpected new capital expenditure (capex) outlay. However, the management team later confirmed that the actual capex is lower than investors initially thought, and the return on investment is high, so the share price has started to recover.
An overweight position in Nexans, a French high-voltage cable manufacturer, also underperformed after a very strong run due to a combination of French political instability and uncertainty around the impact that the US election will have on the outlook for renewable energy and electrification.
Looking ahead
As of 30/11/2024
With European economic growth forecast to increase in both 2025 and 2026, we believe there are signs for optimism. The disinflationary trend is likely to continue, alleviating some pressure on central banks, which have adopted a measured approach to interest rate adjustments.
European equities trade on an extreme discount to US equities. This argument may not be new to prospective investors; however, the European equity market can offer comparable levels of quality and growth potential. This valuation support is recognised by European CEOs, who are buying back more stock than ever before.
Looking ahead, improving economic conditions, attractive fundamentals and structurally improving interest rates are likely to present investors with many appealing opportunities across markets.
JPMorgan European Discovery Trust is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
DirectorsTalk highlights the latest portfolio manager views for Real Estate Credit Investments, Fidelity Asian Values, JPMorgan European Discovery Trust, Fidelity Emerging Markets, Volta Finance and Fidelity Japan Trust, from its leading funds platform.
These articles highlight the attractive capital growth investment opportunities in European, Asia, Emerging Markets and Japan equity markets, as well as two high-yielding dividend income stocks in Structured Products and Real Estate Credit.
Real Estate Credit Investments Limited (LON:RECI) is a closed-end investment company that specialises in European real estate credit markets. Their primary objective is to provide attractive and stable returns to their shareholders, mainly in the form of quarterly dividends, by exposing them to a diversified portfolio of real estate credit investments.
Fidelity Asian Values Plc (LON:FAS)provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region, and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.
JPMorgan European Discovery Trust plc (LON:JEDT) aims to provide capital growth from a diversified portfolio of smaller European companies (excluding the United Kingdom).
Fidelity Japan Trust (LON:FJV) is an investment trust managed by Nicholas Price since 2015, focusing on Japanese equities. The trust follows a growth-at-a-reasonable-price (GARP) investment philosophy, targeting undervalued companies with strong growth potential. The portfolio leans towards small- and mid-cap growth stocks, with an emphasis on under-researched opportunities.
Volta Finance Limited (LON:VTA) is a closed-ended investment company that primarily focuses on structured finance assets. The trust aims to deliver long-term, stable returns by investing in a diversified portfolio of Collateralised Loan Obligations (CLOs) and other structured credit instruments. These assets provide exposure to income-generating corporate debt while managing risk through diversification and active portfolio management.
Fidelity Emerging Markets (LON:FEML) Limited is an investment trust that focuses on equities in emerging markets, seeking to achieve long-term capital growth. Managed by Fidelity’s experienced team, the trust invests across diverse sectors and countries, aiming to capitalise on the structural growth opportunities inherent in emerging economies.
JPMorgan European Discovery Trust plc (LON:JEDT) has announced its unaudited half year results for the six months ended 30th September 2024.
Highlights
• NAV total return of -0.5% compared with +1.0% for the MSCI Europe (ex UK) Small Cap Index (the ‘Benchmark’), The share price return was +2.2% due to a narrowing of the discount at which the Company’s shares traded relative to its NAV.
• For the ten years ended 30th September 2024, the Company comfortably outperformed the Benchmark with a NAV total return of +163.5% compared to +140.1% for the Benchmark. The share price increased by 183.7% over the same period.
• Interim dividend of 3.0 pence (2023: 2.5 pence) per share, which will be paid on 5th February 2025 to shareholders on the register as at 20th December 2024 (the ex-dividend date will be 19th December 2024).
• A total of 6,734,095 shares were repurchased into Treasury in the six months to 30th September 2024.
• Earlier in the year, the Company undertook a Tender Offer resulting in the repurchase of 15% of the issued share capital (excluding Shares held in Treasury).
The Chairman of JEDT, Marc Van Gelder commented:
“The outlook for European small caps, and for your Company, is positive, despite the recent upsurge in global political uncertainty. Easing inflation pressures, declining interest rates and more buoyant consumer sentiment will continue to provide favourable economic tailwinds.”
“We share the Investment Manager’s conviction that innovative and nimble small cap companies are by their nature best placed to capitalise on emerging trends, such as the rapid adoption of artificial intelligence (AI). 2025 looks set to be an interesting and remunerative one for your Company, and one which should serve to extend its long-term track record of strong gains and outperformance. “
JEDT’s Portfolio Managers, Jon Ingram, Jack Featherby and Jules Bloch commented:
“Macroeconomic developments over the review period have been decisively positive. Looking across the asset class, we expect the easing of monetary headwinds and improving economic growth indicators to be favourable for economically geared smaller companies.”
“We anticipate that the combination of attractive valuations, supportive macroeconomic conditions, and long-term thematic drivers will serve as significant catalysts for European smaller companies. This sector of the market has outperformed most other major public asset classes globally over the past two decades, and after a protracted period of underperformance, these stocks are overdue for a resurgence. As we said in our last report, the outlook has rarely been brighter, and we look forward to reporting the Company’s progress on capturing this recovery as it unfolds. “
CHAIR’S STATEMENT
I am pleased to present the Company’s results for the half-year ended 30th September 2024.
Investment Performance
The improvement in the market environment which I noted in the Annual Report continued in the half year to 30th September 2024. Inflationary pressures continued to subside, the European Central Bank (ECB) initiated a monetary easing cycle and real wage increases are lifting consumer confidence. These developments were generally supportive of small cap companies. The Company’s benchmark, the MSCI Europe (ex UK) Small Cap Index, returned +1.0% over the six month period. However, the Company’s performance lagged, recording a total return on net assets of -0.5%. The total return to shareholders was +2.2%, due to a moderate narrowing of the discount at which the Company’s shares traded relative to its NAV, from 10.6% to 8.3%.
This recent underperformance in NAV terms is disappointing, but it follows a period of outperformance for the financial year ended 31st March 2024. As the Company adopts a long-term investment strategy, it is important to also consider performance over a longer timeframe. Over the past five years, the total return on net assets was +32.4%, compared to the benchmark total return of +39.2%. Over the past ten years, the total return of +163.5% was high in absolute terms and comfortably above the benchmark return of +140.1%.
The Investment Manager’s Report that follows provides a review and outlook of markets, as well as more detail on the performance drivers within the portfolio.
Revenue and Dividends
The Company’s net revenue return for the six months to 30th September 2024 was higher than the corresponding period in 2023, at 10.72 pence per share (30th September 2023: 10.42 pence). The Board has decided to increase the interim dividend to 3.0 pence (2023: 2.5 pence) per share, which will be paid on 5th February 2025 to shareholders on the register as at 20th December 2024 (the ex-dividend date will be 19th December 2024). When determining the final dividend for the current financial year, the Board will take into account the income received over the year as a whole, and the level of the Company’s revenue reserves, which stood at £24.47m as at 30th September 2024.
Discount Management and Share Repurchases
The Board continues to monitor the level of the share price discount and believes that its ability to repurchase shares to minimise the short-term volatility and the absolute level of the discount is of prime importance to shareholders. A total of 6,734,095 shares were repurchased into Treasury in the six months to 30th September 2024. A further 2,015,144 shares have been repurchased since the period end. At the time of writing, the share price discount was 12.2%.
Tender Offer
As previously announced, during the year, the Company undertook a Tender Offer providing shareholders with the opportunity to tender up to 15% of the issued share capital in the Company (excluding Shares held in Treasury). 21,160,028 shares were validly tendered pursuant to the Tender Offer.
The Board
In line with the Board’s succession planning on the retirement of Nicholas Smith at the 2024 Annual General meeting, in July, the Board undertook a search to identify a new Director. Following the successful conclusion of this search and as announced, James Will was appointed as an independent non-executive director with effect from the conclusion of the 2024 Annual General Meeting.
James brings a wealth of Investment Trust industry experience, his other Non-Executive Director roles include being the Chair of Asia Dragon Trust plc and the Senior Independent Director at Herald Investment Trust plc.
Environmental, Social and Governance (‘ESG’)
The Board has continued to engage with the Manager on the integration of ESG factors into its investment process. These issues are considered at every stage of the investment decision. The Board shares the Investment Managers’ view of the significance of financially material ESG factors, both when making initial investment decisions and throughout the period of the investment. To this end, it seeks to maintain a meaningful and ongoing engagement with investee companies.
For more details, please refer to pages 30 to 32 of the 2024 Annual Report which can be found on the Company’s website at: www.jpmeuropeandiscovery.co.uk.
Change of Registrar
As mentioned in the 2024 Annual Report, following a competitive tender process, the Company transferred the management of its share register from Equiniti Financial Services Limited to Computershare Investor Services PLC (‘Computershare’), with effect from 16th September 2024.
A notification letter from Computershare was sent to all registered shareholders advising of this change. The letter included an invitation to shareholders to create an online account which will provide access to the details of their shareholdings and an opportunity to participate in the Company’s Dividend Reinvestment Plan (DRIP). Please visit www.investorcentre.co.uk. for further information.
Outlook
The outlook for European small caps, and for your Company, is positive, despite the recent upsurge in global political uncertainty. Easing inflation pressures, declining interest rates and more buoyant consumer sentiment will continue to provide favourable economic tailwinds. In addition, lower rates combined with tempting valuations, are likely to reignite interest in M&A activity in the sector. Some of the Company’s portfolio holdings may be direct beneficiaries. We share the Investment Manager’s conviction that innovative and nimble small cap companies are by their nature best placed to capitalise on emerging trends, such as the rapid adoption of artificial intelligence (AI). Also, after an uncharacteristically long period of underperformance, European small caps are ripe for a rebound. In conclusion, 2025 looks set to be an interesting and remunerative one for your Company, and one which should serve to extend its long-term track record of strong gains and outperformance.
On behalf of the Board I would like to thank you for your ongoing support.
Marc van Gelder
Chairman
INVESTMENT MANAGERS’ REPORT
As we reflect on the first half of the financial year, we observe a dynamic landscape that has significantly influenced the performance of Europe’s smaller companies. Key developments, such as inflation stabilisation, interest rate cuts by the ECB, and rising consumer confidence have shaped market and stock performance. These factors, alongside political events, have created opportunities for investors like us who focus on uncovering overlooked companies (‘hidden gems’) across continental Europe.
In this report we will discuss how these elements have affected the Company’s performance, and we outline our strategic approach moving forward. We will also highlight some of the hidden gems in the Company’s investment portfolio and share our views on European smaller companies.
Macroeconomic Review
Three main factors influenced the performance of Europe’s smaller companies over the past six months: inflation stabilisation, central bank rate cuts, and increased consumer confidence.
• Inflation: In the Euro area, the Consumer Price Index (CPI) fell from 2.4% in March 2024 to 1.7% in September 2024, down from highs of +10% in 2022. Core inflation has fallen to 2.7%.
• Financial Conditions: Lower inflation has allowed central banks to cut interest rates. The ECB has so far reduced rates three times this year, from 4.00% to 3.25%.
• Consumer Confidence: Rising real wages in Europe have boosted consumer confidence, benefiting domestically focused smaller companies.
While political developments can influence market sentiment and risk perceptions, recent elections in the UK and France are only likely to have moderate long-term impact on company fundamentals.
The same can be said about the severe bout of weakness in Japanese stocks during July, after the Bank of Japan raised interest rates and warned of further tightening ahead.
The Chinese government’s array of stimulus measures, announced in September, have led to a rally in Chinese equities, although their success remains uncertain.
Additionally, the result of the US election is expected to add more volatility to global markets as investors react to potential policy changes, though as with the other regions, we believe the long-term performance of stock prices will ultimately be driven by company fundamentals.
Portfolio Performance
Table 1: Performance of JPMorgan European Discovery Trust versus major markets
Company/index name
31st March –30th September2024(%)
JEDT (NAV)
-0.5
NAV relative to benchmark
-1.5
JEDT (Price)
2.2
End of period discount
-8.3
MSCI Europe (ex UK) Small Cap
1.0
MSCI Europe (ex UK)
-0.4
Source: JPMorgan Asset Management and Bloomberg.
Relative to the MSCI Europe ex UK Small Cap index, the Company’s investment portfolio underperformed by 1.5% over the period. The portfolio’s intra-period performance volatility was relatively muted, with an equal number of outperforming months and underperforming months. Portfolio underperformance was driven by some major political and macroeconomic events during the period, including the announcement of the French legislative elections in June, the sudden unwinding of the Yen carry trade in early August, and the announcement of Chinese stimulus measures over September. Each of these events led to a significant increase in the stock market’s risk premium, and this subsequently weighed on the performance of Europe’s Smaller Companies.
Table 2: Sector Performance – Top 3 and Bottom 3 sectors contributing to performance
Account
Benchmark
Attribution
Avg Wgt
Return
Avg Wgt
Selection
Allocation
Total
Group
(%)
(%)
(%)
(%)
(%)
(%)
Real Estate
6.27
19.32
7.85
0.45
-0.17
0.27
Consumer Staples
4.43
6.82
4.80
0.27
-0.05
0.23
Communication Services
7.55
2.98
4.51
0.32
-0.10
0.22
Financials
13.91
3.17
14.24
-0.41
-0.02
-0.43
Consumer Discretionary
11.67
-8.67
8.30
-0.29
-0.30
-0.59
Industrials
32.31
-2.21
25.99
-1.39
0.12
-1.27
Source: JPMorgan Asset Management.
Analysing the Company’s performance by sector, the Real Estate sector was the largest positive contributor to returns. Here, performance was principally driven by increasingly positive sentiment around ECB rate cuts. Within the sector, TAG Immobillen, a German residential building owner and operator, contributed most, on the back of its initially depressed valuation and a stabilisation in property valuations.
The Company’s exposure to Consumer Staples and Communication Services also enhanced returns, with individual stock specifics driving performance in both sectors. Within Consumer Staples, returns were driven by Swedish specialty vegetable oils and fats producer, AAK. This company has benefited over the last six months from a dramatic increase in the price of cocoa butter, which has driven demand for substitutes, including AAK’s palm oil-based products. Within Communication Services, performance was supported by the Company’s investment in CTS Eventim, a German-based online ticketing platform for the entertainment industry. CTS is doing well thanks to rocketing demand for live entertainment. Activity is surging due to changing monetisation trends in the music industry which have led to a rise ‘mega’ tours by artists such as Taylor Swift and Adele.
The Company’s largest sectorial detractors were Industrials, Consumer Discretionary and Financials. The industrial sector underperformance was primarily the result of a ~7% overweight to the sector. Over the review period, the Company exited several of its largest Industrial sector holdings to reduce this overweight. Otherwise, negative performance within Industrials was driven by the continued weakness of the German industrial economy (see ‘Portfolio Changes’ section for further details). Financial sector holdings have been adversely impacted by expectations of a decline in net interest income (NII) now the ECB has begun cutting rates. Despite this headwind for NII, we think the current mantra of ‘higher for longer’ interest rates, coupled with still deeply discounted valuations, should support share price performance in Financials going forward. Finally, Consumer Discretionary names have suffered from a weak automotive market, as well as broader weakness in consumer spending across the US and Europe. Within all these sectors, negative performance was primarily the result of our sector allocation, rather than stock specifics.
Table 3: Investment performance – Top 3 and Bottom 3 investments contributing to performance
Account
Benchmark
Avg
Avg
Wgt
Total
Wgt
Return
Wgt
Diff
Effect
Security Name
(%)
(%)
(%)
(%)
(%)
Nexans
2.12
35.04
0.41
1.71
0.50
Unipol Gruppo
1.94
38.35
0.44
1.50
0.46
Bonesupport
1.66
33.04
0.16
1.50
0.43
Scor
1.01
-34.87
0.44
0.58
-0.51
Stabilus
1.01
-35.50
0.14
0.87
-0.52
Kion
1.55
-33.26
0.34
1.22
-0.67
Source: JPMorgan Asset Management.
The top three contributors to performance over the period were Nexans, Unipol Gruppo, and Bonesupport.
Nexans, a French company, is the world’s second largest supplier of high voltage cables. This investment contributed strongly to performance thanks to continued massive demand for their high voltage cable solutions. Nexans provide the high specificity cables needed to connect offshore wind farms to the electrical grid. Their cables are also used as transnational interconnectors to connect power grids in one country to those of other countries. Through these businesses Nexans play a key role in the transition to renewable energy. We believe their investment thesis is just starting to play out, and we have a high conviction for Nexans’ investment proposition going forward.
Unipol Gruppo is an Italian insurance provider and financial conglomerate. The stock contributed strongly to returns following the company’s decision to streamline its operating structure by merging its Hold-Co structure with its listed subsidiary, Unipol Sai. In addition, results have been consistently strong throughout the year.
Bonesupport, a Swedish healthcare company specialising in orthobiologics, also contributed positively following their expansion into the US market. FDA clearance of the company’s spinal fusion treatment was also received sooner than expected.
The top three detractors were Scor, Kion and Stabilus. We have subsequently exited all three positions.
Scor, a French reinsurer, underperformed due to missed expectations driven by US mortality claims. This led to a profit warning which raised questions around the potential volatility of future profits. Kion, a German manufacturer of forklift trucks, also faced a weak start to the year. Poor order intake delayed the potential for recovery and left no indication of when a recovery could start. Stabilus, a German manufacturer of gas springs and power risers, also issued a negative profit update citing lower demand for automotive and commercial vehicles. This also led us to believe the recovery we expected would continue to be delayed.
Portfolio Changes
Table 4: Top 3 investment portfolio buys and Top 3 sells
Change
Trade
Security Name
Sector
PRT (%)
Type
Nexans SA
Industrials
1.7
Topped up
Banco Comercial Portugues
Financials
1.5
New buy
Cairn Homes PLC
Consumer Discretionary
1.4
Topped up
Kion
Industrials
-2.7
Sell out
Scor
Financials
-2.4
Sell out
Hensoldt AG
Industrials
-1.8
Sell out
Source: JPMorgan Asset Management.
During the period, we increased the Company’s investment holdings in Nexans and Cairn Homes, an Irish home builder, and initiated a new position in Banco Comercial Portugues (BCP).
The boosted position in Nexans followed its recent strong performance, as discussed earlier, which increased our confidence in the business’s strong market position. We also like Nexan’s ability to drive shareholder value through higher margins and through cash flows, thanks to extraordinarily strong global demand for high voltage cables in a tight supply market.
The decision to invest in BCP, a Portuguese retail bank, was driven by confidence in its investment case following a turnaround in business performance supported by persistently high interest rates.
The Company’s third largest portfolio position change was the increase in holding of Cairn Homes. Cairn are currently benefitting from improved housing demand in Ireland. We also received positively their announcement to extend their share buyback programme. We increased our position when the ECB began lowering rates as this should, on a fundamental level, support further demand for new housing.
The Company exited positions in Scor, Kion, Stabilius and Hensoldt. We felt uncertain about the future earnings prospects of each of these investments (the reasons for the disposal of the first three names are discussed earlier). With Hensoldt, a key supplier of sensor technologies to the defence industry, the decision to sell was motivated by our concerns about domestic political support for further German defence spending, given the country’s fiscal challenges.
As a result of the above portfolio changes, the Company’s investment portfolio sector positioning has evolved as shown in the 2024 Half Year Report of the Company.
Over the half year, exposure to Communication Services grew to become the Company’s largest sector overweight. This growth was driven by strong performance from the Company’s investments in businesses such as the previously mentioned CTS Eventim.
Industrial sector exposure contracted, becoming the second largest sector overweight. We continue to see a significant number of opportunities within this sector, and we believe industrials should do well as Europe recovers from the effects of inflation and the European energy crisis. We have, however, decided to reduce the portfolio’s sector weighting based on stock specific decisions.
The Company’s exposure to the Real Estate and Healthcare sectors, both sectors sensitive to interest rates, increased over the period. We feel that the ECB’s rate cuts should support specific areas of the Real Estate sector, especially German residential real estate investment, over the coming months. In Healthcare, we have increasing conviction in several companies offering unique technologies, which have so far been overlooked by the market. For example, we have built a position in Camurus, a Swedish drug development company with proprietary drug delivery technology that we believe is at the beginning of a multi-year growth cycle. Top performer Bonesupport, mentioned above, also falls into this category.
Materials remain the portfolio’s largest underweight due to their cyclical nature and poor track record in value creation. Although post-pandemic demand and energy price spikes boosted materials sector margins, recent declines in gas and electricity prices pose challenges for the sector.
Outlook
When considering the outlook for European financial markets, one uncomfortable reality is that political uncertainty is escalating, especially given the perceived binary nature of many national elections occurring around the region and world. However, we cannot second guess the impact of political events on financial markets. The Company’s investment strategy remains focused instead on identifying Europe’s ‘hidden gems’ – great companies with strong fundamentals that have escaped the attention of most investors.
Macroeconomic developments over the review period have been decisively positive. Looking across the asset class, we expect the easing of monetary headwinds and improving economic growth indicators to be favourable for economically geared smaller companies.
In addition, after a period of subdued deal flow, lower interest rates in concert with attractive valuations, are likely to catalyse an uptick in M&A within the European smaller companies space. We believe this should benefit both the asset class and the Company. Private equity investors and other participants in M&A activity tend to seek out the same kind of overlooked businesses that we seek, and we expect some of our portfolio holdings to be targeted by these investors. Please refer to the charts in the 2024 Half Year Report of the Company.
The portfolio’s exposure to structural themes will be another driver of portfolio returns. We continue to hold a strong conviction that many of the companies that will be most successful in harnessing the AI revolution, pharmaceutical advancements, and other emerging structural trends, are likely to originate from the smaller companies space within Europe. Many of these future leaders are yet to be identified (or even conceived), but we are always on the lookout.
We anticipate that the combination of attractive valuations, supportive macroeconomic conditions, and long-term thematic drivers will serve as significant catalysts for European smaller companies. This sector of the market has outperformed most other major public asset classes globally over the past two decades, and after a protracted period of underperformance, these stocks are overdue for a resurgence. As we said in our last report, the outlook has rarely been brighter, and we look forward to reporting the Company’s progress on capturing this recovery as it unfolds.
Jon Ingram
Jack Featherby
Jules Bloch
Investment Managers
JPMorgan European Discovery Trust is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
JPMorgan European Discovery Trust (LON:JEDT) have published its October factsheet.
Month in review as of 31/10/2024
The trust outperformed the benchmark over October.
Positive contributors to relative returns included stock selection in oil, gas & coal and banks.
Detractors included stock selection in leisure goods and automobiles & parts.
At the stock level, an overweight position in Aker Solutions, a Norwegian energy equipment and services company, contributed to performance over the month. The firm’s share price rose after it announced an extraordinary dividend amounting to almost 50% of the share price.
Our overweight position in Cairn Homes, an Irish residential construction company, also contributed to performance over the period due to continued strong momentum and support for residential construction from the Irish government.
Our overweight position in Munters, an air treatment solutions provider, detracted from performance due to weaker-than-expected third-quarter results.
Our overweight to AAK, a speciality oils and fats company, also detracted from performance following strong performance and solid third-quarter results. We believe this is due to profit-taking, paired with investors’ cautious stance around tougher comps and increased uncertainty surrounding the impact of cocoa pricing pressures on the demand for confectionery.
Looking ahead as of 31/10/2024
Geopolitics, commodity prices and supply chains remain key considerations. Escalating conflict in the Middle East and ongoing disruptions to shipping in the Red Sea could have significant impacts on many companies. However, many commodity prices have been easing in response to falling demand from China in particular, which could help contain inflationary pressures.
European equities trade on an extreme discount to US equities. That discount has grown following strong 2023 technology-led gains in the US. This argument may not be new to prospective investors, but the European equity market currently can offer comparable levels of quality and growth potential.
Improving economic conditions, attractive fundamentals and structurally improving interest rates are likely to help extend this rally, presenting investors with many attractive opportunities across markets.
The JPMorgan European Discovery Trust plc is a UK-based investment trust focused on achieving capital growth through a diversified portfolio of smaller companies across continental Europe, excluding the United Kingdom. Established in 1990 and listed on the London Stock Exchange under the ticker symbol JEDT, it is part of the FTSE 250 Index. Managed by J.P. Morgan Asset Management, the trust aims to outperform the MSCI Europe (ex-UK) Small Cap Net Total Return Index, its benchmark. It was formerly known as JPMorgan European Smaller Companies Trust plc before adopting its current name in June 2021.
JPMorgan European Discovery Trust (LON:JEDT) month in review as of 30/09/2024.
The trust outperformed the benchmark over September.
Positive contributors to relative returns included stock selection in media and an underweight position in technology hardware & equipment.
Detractors included stock selection in travel & leisure and construction & materials.
At the stock level, an overweight position in CTS Eventim, Europe’s largest ticketing company, was positive for relative returns. The share price moved higher following news that the company would merge two of its subsidiaries to create additional synergies, optimise management structures and drive growth more effectively. Comments from key peer Live Nation also supported the shares, with management providing an upbeat message on the ongoing growth of live music and entertainment.
An overweight position in TAG Immobilien, a German residential real estate company, also contributed to performance over the month as interest-rate cuts by the European Central Bank (ECB) are forming a tailwind to the sector and improving investor sentiment.
An overweight position in DO & CO, a hospitality services provider, detracted from performance over the month due to what we believe was profit-taking following its strong performance, which had approached multi-year highs.
An overweight position in Fugro, a Dutch geological data specialist, also detracted from performance over the month due to what we believe was profit-taking following its strong performance, which had approached multi-year highs.
Looking ahead
Geopolitics, commodity prices and supply chains remain key considerations. Escalating conflict in the Middle East and ongoing disruptions to shipping in the Red Sea could have significant impacts on many companies. However, many commodity prices have been easing in response to falling demand from China in particular, which could help contain inflationary pressures.
Europe’s manufacturing sector is recovering, and potential rate cuts by the ECB could provide relief. Fiscal policies may boost demand, especially in green energy and defence spending, offering more upside potential compared to the US.
European equities trade on an extreme discount compared to US equities. That discount has grown following strong 2023 technology-led gains in the US. This argument may not be new to prospective investors, but the European equity market currently can offer comparable levels of quality and growth potential.
JPMorgan European Discovery Trust plc (LON:JEDT) offers investors diversified access to this world-beating market and potential investors may like its recent, more balanced investment approach, and fresh focus on micro-cap companies, which is intended to fully utilise the new managers’ stock selection skills.
The European small-cap sector’s long-term track record of outperformance versus most other major markets should prove a major drawcard for investors, especially as valuations are low in absolute and relative terms, and a look at previous investment cycles suggests a rebound is due soon.
JPMorgan Asset Management’s very significant fundamental research resources, combined with the use of state-of-the-art, AI-driven quantitative tools, arguably provide JEDT with a competitive edge over its peers.
JEDT’s shares are currently trading at a discount to NAV of around 9%, and there is scope for this discount to narrow if performance remains good and/or investor sentiment towards the sector continues to improve.
JPMorgan European Discovery Trust is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
In this presentation, Jules Bloch, portfolio manager for the J.P. Morgan European Discovery Trust (LON:JEDT), shares key insights into how the Trust identifies and invests in high-potential small cap companies across Europe. Bloch outlines the Trust’s strategic approach, highlighting the use of cutting-edge technology, quantitative research, and deep market expertise to uncover businesses with strong fundamentals and long-term growth prospects. With a focus on small companies trading at attractive valuations, the presentation offers a compelling case for investors looking to tap into Europe’s underappreciated growth opportunities.
The J.P. Morgan European Discovery Trust focuses on investing in small cap companies across Europe, excluding the United Kingdom. The Trust seeks to identify businesses with strong fundamentals, sustainable advantages, clear strategic paths, and untapped growth potential. These companies typically have market capitalisations between €300 million and €10 billion.
With over 30 years of experience, the Trust leverages advanced technology, data analysis, and quantitative research to make well-informed investment decisions. The portfolio is highly selective, usually comprising 50 to 80 companies from a universe of around 2,000, targeting businesses that offer long-term shareholder value at attractive prices.
