Winterflood Investment Trusts has replaced Alexander Darwall’s Jupiter European Opportunities investment trust with Sam Morse’s Fidelity European Values in its recommendation list.
The Fidelity European Value investment trust – a corporate brooking client of Winterflood’s – was added to its list as it offers greater value, currently trading on an 11 per cent discount to net asset value.
“We view Fidelity European Values as a more mainstream play on European equities than Jupiter European Opportunities, although it is actively managed with around 60 holdings and no underweight positions are held,” it reports.
The investment trust research house noted Morse’s 5 per cent increase in NAV since taking over management of the trust at the start of 2011, compared with a 2 per cent fall in benchmark. Morse was named manager of the investment trust – whose previous managers include Anthony Bolton and Tim McCarron – at the end of 2010, taking over from Sudipto Banerji.
According to Winterflood, the Jupiter European Opportunities investment trust is now trading at NAV, compared with a 9 per cent discount for the sector.
Winterflood reports although European closed-end funds may not be in favour with investors, discounts in the sector have tightened owing to renewed buying interest.
“We believe that recent performance within European markets combined with the relatively slow pace of political developments has meant that investors are no longer as willing to hold significant underweight positions to Europe,” it adds.
“If this trend continues and assuming that there are no sudden shocks within the eurozone – admittedly a rather large assumption – then European markets could continue to rise from a relatively low base and discounts within the sector could continue to tighten further.”
However, despite dropping the Jupiter European Opportunities from the list, Winterflood continues to rate the trust and manager Alexander Darwall highly.
“However, following a strong period of outperformance we note that this fund now trades around NAV, while the European sector average discount is near to 9 per cent,” it reports.
“For shareholders wishing to maintain their investment with Darwall while avoiding discount risk, we would suggest that they consider Darwall’s open-ended fund.”
The analysts have maintained the Henderson European Focus investment trust on its list of recommendations.