Fidelity European (FEV), a £2bn sector leader after last year’s merger with Henderson European, made a decent 16.3% underlying return in 2025, helped by its holdings in banks and other financials.
However, it hugely underperformed the FTSE World Europe ex-UK index which shot up 27.9% as cheap value stocks did better than the quality growth companies Fidelity fund managers Sam Morse and Marcel Stotzel prefer.
Annual results show a big holding in Novo Nordisk, the Danish anti-obesity drug provider struggling with competitive pressures, and an underweight in defence stocks the managers viewed as expensive also weighed on returns.
A 6p final dividend lifted the total pay-out for the year by 8.8% to 9.9p per share. The latest performance data shows its 12-month return has slipped to 2.5%. Over five years it has made just over 62% for shareholders, ranking it second out of five listed funds in its sector, behind JPMorgan European Growth & Income (JEGI) which has generated nearly 112%.
Our view
Matthew Read, senior analyst at QuotedData, said: “This is Fidelity European Trust’s first set of results following its combination with Henderson European Trust. While absolute returns were positive, the underperformance versus the benchmark is notable. FEV is managed with a ‘benchmark-aware’ approach and relatively tight sector controls, meaning relative performance is typically driven by stock selection rather than asset allocation. As such, this degree of underperformance is unusual but seems to be mostly a case of wrong place, wrong time.
“During 2025, FEV’s portfolio appears to have been caught on the wrong side of several trends. These included a bias towards less-cyclical stocks that lagged the market rally; an underweight to European defence companies that surged amid rising geopolitical tensions; and a preference for France – whose market fell as concerns over the budget deficit and political instability intensified – over Germany, which benefited from a shift towards more expansionary fiscal policy, rate cuts and increased defence spending, all of which helped offset sluggish domestic growth. Exposure to Novo Nordisk also detracted as its semaglutide franchise (including Wegovy and Ozempic) faced intensifying competition from Eli Lilly’s tirzepatide drugs such as Mounjaro. Software holdings including SAP and Dassault Systèmes also detracted amid weaker enterprise software spending and concerns over the potential impact of AI on their competitive positions.”
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