Jim Campbell is putting his money where his mouth is. Convinced that equities are as cheap as they’ll get, he and co-manager Francesco Conte are gearing up the JP Morgan European Fledgling Investment Trust for the first time in two years. “Earnings downgrades are slowing, which is typically a good lead indicator that the market has bottomed out”, says the Scottish-born economics graduate in Fund Strategy.
Gearing up involves borrowing money to buy stocks and other securities in the hope of boosting returns as asset prices rise. Many funds, such as unit trusts, can’t do this, but investment trust rules permit it. As a result, 8% of the trust’s assets are now financed through borrowing, with Campbell and Conte targeting growth stocks in the pharmaceutical, healthcare, and IT software and services sectors.
Sieving through the HSBC Smaller Companies Index, they look for stocks across 15 different markets. They doubled their exposure to small-caps stocks in February, and moved from holding cash to borrowing money last month in a bid to snap up fresh opportunities. Recent investments include Biomerieux, a French blood-testing specialist, and Jumbo, a discount retailer in Greece that is expanding into the Balkans.
Down 21.8% over one year, the fund has an impressive long-term track record. In five years, it’s up 133% against a 70.3% rise for the HSBC Smaller Euro Index. The total expense ratio is 1.44%. It also trades on a discount of 13% to net asset value. So you can buy shares in it fairly cheaply and enjoy an extra win if that gap narrows.
Contact: 0800-403030.
JP Morgan European Fledgling top ten holdings
| Name of holding | % of assets |
|---|---|
| NameSoftware 602 AS | 2.8 |
| Qiagen NV | 2.7 |
| Maurel & Prom | 2.4 |
| Prosegur Compania Securidad | 2.2 |
| Castellum AB | 2.2 |
| Indra Sistemas SA | 2.1 |
| Hannover Rueckversicherungs AG | 2.1 |
| Swedish Match AB | 2.1 |
| Acea Spa | 2.1 |
| Topdanmark A/S | 2.1 |