A best-selling investment trust focused on Europe

One of the key attributes to look for when selecting an actively managed fund is whether it has a consistent record of beating its benchmark. A good example is the Fidelity European Trust, which has outperformed in nine of the last ten years, so it is no surprise that it appears in our list of best-selling investment trusts for January and February.  

The fund aims to deliver long-term capital and income growth, mainly by investing in continental European companies. It has been run by Sam Morse since 2011, with Marcel Stötzel appointed co-manager in 2020.

Strategy and portfolio

Fidelity European Trust has built up a strong track record by providing a core defensive exposure to the region’s equities. Its strategy can be summarised as ‘growth at a reasonable price’, where the focus is on high-quality companies with good dividend growth prospects that are trading at attractive valuations.

The managers typically invest in 50-60 stocks and take a long-term view, with over half of the names having been held for at least a decade. At the end of January the ten largest positions accounted for 47.1% of the assets, making it relatively concentrated, although it is well-diversified by sector with the biggest allocations being Financials, Healthcare and Industrials¹.

Fidelity European Trust – top 10 holdings

1. ASML
2. Novo Nordisk
3. Nestle
4. LVMH Moet Hennessy
5. SAP
6. TotalEnergies
7. L’Oreal
8. Roche Holdings
9. EssilorLuxottica
10. Hermes International

^{Source: Fidelity International, 29.2.24}

Outlook for 2024

Morse and Stötzel think that Europe could experience a period of stagflation this year, in which the continent suffers a combination of low economic growth and high inflation. To combat this they have selected stocks that have strong pricing power, while avoiding those with stretched balance sheets².

The managers are keen to point out that the performance of European companies is not dependent on the region’s economy, with the FTSE World Europe ex UK benchmark having kept pace with the MSCI World Index over the long-term. They continue to believe that equity returns are driven by real dividend growth rather than economic growth².

How has it performed?

Fidelity European has outperformed its benchmark over the past one, three and five years on an NAV total return basis, with gains of 11.2%, 44.3% and 85.7% respectively. Since inception in 1991 it has grown by almost four times as much as the index, which is a remarkable achievement¹. Please remember past performance is not a reliable indicator of future returns.