Marc van Gelder, chair of JPMorgan European Discovery (JEDT), will step down next month after nine years on the board, pleased that the change in fund managers he oversaw two years ago has turned round performance.
Annual results show the £599m smaller companies trust run by JP Morgan portfolio managers Jonathan Ingram, Jack Featherby and Jules Bloch delivered a total underlying return of 23.2% in the year to 31 March.
That beat the 17.5% gain in the MSCI Europe (ex UK) Small Cap Net Total Return index and marks a more decisive level of outperformance than in the previous year, the managers’ first in charge, when the company made a total return on net assets of 2.9% above the benchmark’s 1.3%.
Shareholders had to make do with a slightly smaller return of 21% in the latest financial year as the share price discount – or gap to net asset value (NAV) – widened to 9% from 7.3%. It is currently 8%.
However, it was a good absolute return that reflected increased investor interest in European smaller companies with the portfolio reaping the gains from stocks benefiting from higher infrastructure and defence spending.
Moreover, it means JEDT is now outperforming its benchmark over three, five and 10 years in contrast to early 2024 when it trailed the index and rivals under former managers Francesco Conte and Edward Greaves. A review by the board and JPMorgan Asset Management led to the appointment of the new team in February that year.
According to figures from JEDT, at 31 March its three-year NAV total return of 35.3% beat the benchmark’s 26.1% and underpinned a 46.2% total return for shareholders including dividends.
Over five years the NAV and share price returns were 30.5% and 38.2% respectively versus 26.7% for the index. Over a decade the respective returns for the trust were 139.6% and 149.9% against 138.7% for the MSCI Europe Small Cap index.
The growth fund also had good news on income, generating a record revenue return of 18.18p per share, a rise of 47.1% on 12.36p in the previous year. In response the board declared a final dividend of 13p per share, taking the total to 16p, up from 13p.
“I am pleased to report that this year’s outperformance enhanced the company’s already robust long-term performance track record. The company has now made absolute gains and outperformed the benchmark over the three-, five-and ten-year periods ended 31 March 2026,” said Gelder who will be replaced by James Will after the annual general meeting in July.
Will, a lawyer and experienced investment company director and chairman, joined the board two years ago. He has established a reputation for deal making in the past four years having overseen the mergers of Scottish investment trust with JPMorgan Global Growth & Income (JGGI), Asia Dragon’s merger with Invesco Asia (IAD) last year and this year’s combination of BlackRock Throgmorton with BlackRock Smaller Companies (BRSC).
This raises the question of whether he could involve JEDT in sector consolidation? The scope for that could be limited as the sector has just three trusts following European Assets’ merger last year with the now £827m European Smaller Companies Trust (ESCT) which, in addition to JEDT, leaves just the £225m Montanaro European Smaller Companies (MTE) trust.
Our view
Richard Williams, senior analyst at QuotedData, said: “The resurgence of European small caps, fuelled by increased infrastructure spending and a sharp rise in defence expenditure, provided a favourable environment for the trust’s cyclical and domestically focused holdings. Management’s stock selection and sector allocation played into this backdrop, with the trust’s overweight positions in industrials, financials and energy accounting for the majority of outperformance of the benchmark. The trust is positioned to benefit if a broader re-rating of European small caps materialises as investor capital rotates away from the crowded US mega-cap trade and back towards cheaper, domestically focused European equities.”
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