Investment trust insider on European Opportunities – James Carthew: Why I’m giving Darwall benefit of the doubt
A lot has happened to European Opportunities (JEO) since I last wrote about it in October 2019. Back in 2019, I questioned the wisdom of the size of its holding in Wirecard. This was well-founded as it turned out when, in June 2020, after years of being targeted by short-sellers, the company filed for insolvency.
Many column inches have been devoted to this and so I won’t rehash the story here. Fund manager Alexander Darwall issued a mea culpa, the trust’s discount widened and remains at 10%.
I know that the Wirecard debacle destroyed a lot of faith in JEO, but I am optimistic that lessons have been learned. Darwall has a considerable amount of his own money tied up in the trust – almost £27m. The portfolio remains concentrated, but, in-line with risk controls imposed by the board, the largest positions are now just over 10% of the portfolio.
That is about the limit of what I think is reasonable for most conventional equity portfolios, rather than the high teens that Wirecard reached before its demise. JEO now faces a long march back to respectability and a premium rating.
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