EUROPEAN OPPORTUNITIES TRUST: Our time will come again, says boss of £760m fund

Although economic growth across Europe remains anemic due to persistent inflation, this is not too much of a concern for Alex Darwall, manager of the European Opportunities investment fund.

He believes there are plenty of robust companies across Europe that can still offer investors the chance to earn more than half-decent returns over the long term.

Darwall, chief investment officer of fund group Devon Equity Management, has overseen listed investment trust European Opportunities since 2000. In that time there has been no change in the investment style or the ‘drift’ of the investments.

He says: ‘We try to invest in companies that operate in growth sectors – and where competitors have little chance of eroding their strong market position.’

The result is a portfolio worth £760 million, made up of just 30 companies, including some listed on the UK stock market (not all European funds invest in the UK). While there is a bias towards healthcare and information technology stocks, Darwall says holdings are spread across many sectors.

“Essentially, we are interested in companies whose products are in high demand,” he adds. They are also usually global companies with major sales outside Europe. Major trust companies such as British-listed data analytics companies Experian and RELX – and genetics specialist Genus – all do a large part of their business in the United States.

The largest stake (by a considerable distance) is in the Danish healthcare company Novo Nordisk, a leader in the production of drugs such as Ozempic to combat diabetes – and combat obesity. “We like the company,” says Darwall, “because what it does is so hard for competitors to copy. Only American rival Lilly competes seriously in the same areas.’

In recent months the trust has quietly reduced its stake, just because it has become such an important position at 13 percent. Yet it will remain an important part of European opportunities. “It meets all our requirements,” says Darwall. ‘For example, Wegovy, the weight loss drug, has been approved in Britain and will be in high demand. This means we get a good idea of ​​what this means for increasing the company’s future revenue.”

The trust has comfortably outperformed its benchmark, the MSCI Europe Index, since launch. Yet relative performance, versus both the index and rival funds, has stalled in recent years.

Over the past five years, European Opportunities has generated a 0.1 percent loss for shareholders, compared to a 33.9 percent return on the average European trust.

Darwall attributes most of this underperformance to his decision to sell many of the trust’s consumer-facing stocks when the world went into lockdown in early 2020. Some of these shares, such as Ryanair, have been bought back.

“Michael O’Leary, CEO of Ryanair, is a great leader,” said Darwall. ‘The company is stronger than ever.’

Darwall believes the trust’s fortunes will improve. “Our time as investment managers will come again,” he emphasizes. “We have a portfolio that includes some of the largest companies in the world. We are committed to delivering results for our loyal shareholders.”

Next month, shareholders will decide whether the trust should continue for at least another three years – or be liquidated. The trust has survived similar votes before.

The annual fee is 0.9 percent, the stock market identifier is 0019772 and the ticker is EOT. Currently, the shares are at a discount of almost 11 percent to the value of the trust’s assets.