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JPMorgan European Growth reviews stock picking after a tough year
The JPMorgan European Growth investment trust is reviewing its stock selection after a slump in performance.
JPMorgan European Growth trust is reviewing its stock selection after a slump in performance and concerns about more market volatility.
The review comes as the trust’s results showed its net asset value (NAV) fell 13.6% in the year 31 March to underperform the benchmark FTSE AW Developed Europe ex UK index, which fell 12.1%.
According to the board the fund was hit by a ‘few months of high anxiety’ during 2011 and opted to remain underweight in the banking sector, exiting its Greek, Portuguese and Irish positions.
But holdings in French banks, motor group Faurecia and chemical groups Arkema and BASF all contributed to the poor performance.
The trust also suffered in 2008 when exposure to financials hit returns, compounded by gearing, or money borrowed by the trust to make further investments.
Figures from Numis Securities show that over five years its NAV has fallen 25% and its share price has declined 27.9%, the second worse performance in the seven-strong Europe investment trust sector.
Charles Cade, analyst at Numis Securities, said: ‘In 2008 with the financial crisis being geared caused a major hit, in addition the fund had some banking exposure so performance came off quite dramatically that year.
‘It subsequently recovered and last year wasn’t a disaster but the board showed signs of being uncomfortable when the fund is underperforming in weak markets. Although it has shown quite a strong recovery it is still back below, on relative terms, where it was pre-2008.’
Its biggest shareholder is US-based 1607 Capital Partners, which holds 22% of the trust.
Cade added: ‘They hold quite a lot of funds. They’re not an activist in the way that some hedge funds are but they are a value investor.
‘I think it [review] is more prompted by the board but ultimately when you do have a large shareholder, if you’re underperforming pressure will start to build.’
The trust has two share classes. Its growth shares are currently trading at 145.5p, an 11.5% discount to its NAV of 164.3p per share. The income class are also trading at 76.5p, an 11.8% discount to NAV of 87p per share, however this share class is not under review.
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