Investment trust insider on European trusts

Investment Trust Insider on Perpetual Income and Growth

Investment trust insider on European trusts – James Carthew: where I should have put my Darwall dough

The board of Jupiter European Opportunities (JEO) has agreed terms with Devon Equity Management, the new management company established by Alexander Darwall. It will move across from Jupiter to Devon on 15 November.

Jupiter is entitled to fees under its management contract until the end of May 2020. New fee arrangements will take effect from 1 June 2020 and I was pleased to see that the new fee will be based on net rather than gross assets. Devon won’t take fees until then, so shareholders won’t suffer any double charging.

The performance fee is also being dropped. I didn’t have a problem with the performance fee but Darwall has a large personal stake in the trust and so is clearly incentivised to make it perform anyway.

Recently I’ve been asked several times whether I think there is any parallel between Darwall going solo from Jupiter with Neil Woodford’s departure from Invesco and the establishment of his own fund management company in 2014? The short answer is no. I am a shareholder in JEO and, if I was overly concerned about the move, I would head for the exit but instead I am holding on.

That doesn’t mean I am entirely happy with my holding in what is to be called simply the European Opportunities Trust in future. You might remember I took some profit in September last year. The shares were trading on a premium over net asset value (NAV) then and I was a bit uneasy about the size of one position in the portfolio – the holding in German electronic payments business, Wirecard.

Darwall manages the trust with a fairly focused portfolio, which on balance I think is a good thing. However, any position in a stock that is larger than 10% of net assets feels a bit excessive to me. Wirecard was 15.2% of JEO’s portfolio at the end of this August.

The Financial Times is not a fan of Wirecard and is questioning its accounting. Consequently, Wirecard’s shares have fallen by more than 18% since the end of August, implying a 2.7% hit to JEO’s NAV.

Wirecard rejects… read more here