JPMorgan European Growth & Income Ord

JEGI’s NAV and share price total return over the last five years are c. 94% and 12% respectively, compared to the returns of an ETF tracking the market it invests in, the iShares MSCI Europe ex UK, which has returned 60%. The Morningstar Europe peer group of similar actively managed investment trusts that specialise in Europe delivered an average NAV total return was c. 40%. The JEGI team are primarily focused on stock picking, and their own analysis shows that this is overwhelmingly the source of outperformance in the short and long term. One of JEGI’s distinctive features is its dividend policy, set at 4% of net asset value each year. This means that the level of the dividend rises and falls with net asset value over the years, rather than the progressive dividend that more specifically income-orientated investment trusts tend to pay, Consistent, risk-controlled performance will at least help to limit the volatility that investors will experience in dividend payments compared to a more traditional strategy.

The chart below is a very good illustration of how JEGI has generated consistent outperformance. The chart shows JEGI’s NAV total return divided by the ETF mentioned above and by the peer group average, with an upward slope indicating outperformance. Focusing on the blue line first, this shows JEGI’s outperformance against the passively managed ETF, a pattern of gradual outperformance with no sudden divergences, in keeping with its ‘core’ objective. The second line is interesting as it illustrates how more recently JEGI has outperformed its actively managed peer group. This recent phase has seen a shift in market leadership from some of the well-known ‘global champions’ of European equity markets, exemplified by global pharmaceutical giant Novo Nordisk, or the luxury goods firm LVMH, to more domestic sectors, notably banking and defence. An enduring theme among European equity funds has been that Europe’s global champions are companies that can perform well even if European economies are not, and whereas much of JEGI’s peer group was slow to recognise the market shifting away from this theme, the team managing JEGI successfully anticipated this shift in momentum and positioned the trust accordingly. The result has been strong outperformance in a year when many active managers have struggled to keep pace with the benchmark. That this was achieved within quite tight risk controls is all the more impressive.

JEGI provides investors with a ‘core’ European equity fund, aiming to add incremental value of one or two percentage points a year above the benchmark within a risk-controlled framework. Sector and country exposures are kept close to the benchmark, with returns mainly generated from stock picking. A portfolio of about 90 stocks is predominantly built around large companies, but JEGI can and does invest in mid and small cap companies, typically limiting individual positions to less than half a percent in recognition of the higher risks of smaller companies. Historically, approximately 10-15% of the portfolio has been allocated to smaller companies.

JEGI portfolio companies typically come at a slightly lower valuation against the benchmark, while at the same time generating growth efficiently. In simple terms, these are ‘quality’ companies with a track record of getting good returns on any investments they make in the business. On top of this, JEGI’s managers carefully monitor changes in the momentum of their companies’ earnings, having observed over many years that the stock market can be slow to recognise when a company’s fortunes have improved. Thus, the team seek to identify the point at which the trajectory of a company changes, before this begins to be reflected in the share price.

The team have a good track record of identifying these points both for positive and negative trends, and as a result the portfolio evolves over time without showing favouritism to specific stocks. For example, in previous years JEGI has made good returns from Europe’s ‘global champions’ but more recently, in 2024 and 2025 their momentum analysis led to rising exposure to banking and defence companies, both areas which have seen improving fortunes and consequently been among the leading performers in Europe in 2025. As a result, while JEGI’s core characteristics of lower valuations and better returns on capital hold true across cycles, the composition of the portfolio in terms of individual stock names can and does evolve and investors may therefore expect that the top ten holdings, for example, may not always be a close match to the benchmark.

• The trust uses modest gearing, which can amplify losses as well as gains
• The dividend rises and falls with the net asset value, in contrast to a traditional progressive dividend
• JEGI can and does take some exposure to smaller companies, which can be more volatile