DIY Investor Magazine
| Oct 2017
8
HOW INVESTMENT TRUSTS CAN HELP YOU
SEEK INCOME AND GROWTH IN EUROPE
With less than 18 months to go before the United
Kingdom is due to leave the European Union (EU)
in March, 2019, investors should consider how
international diversification may diminish the risks
inherent in stock markets. Brexit might prove a great
success and many pooled funds will continue to focus
on the UK but this does not have to be an either/or
choice for individual investors, some of whom could
benefit from opportunities overseas.
Rather than having all your eggs in one basket it might
make sense to consider some professionally-managed
asset allocation across 28 countries currently in the EU
and other sovereign states in Continental Europe. While
the outcome of Brexit for good or ill remains uncertain,
J.P. Morgan Asset Management offers a range of
tried-and-tested investment trusts within the UK and
across the broader European region which can enable
investors to retain exposure to the biggest economic
trading bloc in the world. The EU is home to more
than 500m consumers whose average gross domestic
product (GDP) is Euro 25,000 per annum (1).
For example, JPMorgan European Investment Trust plc
- Growth Shares delivered total returns to shareholders
of 30% last year and 132% over the last five years to
August 31, 2017 (2). JPMorgan European Investment
Trust plc - Income Shares delivered even higher returns
of 36% over the last year and 159% over the last five
(2). So, whatever your views on Brexit, it may be worth
considering European opportunities in addition to funds
that will continue to focus on Britain – such as JPMorgan
Mid Cap Investment Trust plc which invests in the
more domestically focused medium-sized companies
that make up the FTSE 250, delivering returns to
shareholders of 19.04% over the last year and 196%
over the last five years.(2)
HOW TO MAKE THE MOST OF BREXIT
Nobody can be sure how Brexit will unfold and some
potential outcomes could be beneficial for the UK
economy and investors in it. For example, the UK Brexit
Secretary David Davis has said he hopes to agree a
“seamless” trade deal with the EU which he said will be
“an outcome which is in everyone’s interests” (3).
Most British individual investors will continue to have
their earnings and expenditure denominated in sterling
and so it makes sense to retain investment exposure
to the UK economy. A wide range of tried-and-tested
pooled funds are focused on the UK, such as The
Mercantile Investment Trust which seeks capital growth
from a portfolio of UK medium and small company
stocks. Mercantile has delivered total returns to
shareholders of 23% over the last year and 131% over
the last five years (2). However, investors who do not
wish to keep all their eggs one basket may decide it
makes sense to hope for the best from Brexit while
preparing for other potential outcomes.
BUSINESS AS USUAL: GOING FOR GROWTH
Whatever else happens, Continental Europe is likely
to remain home to many companies which are global
leaders in their industrial sectors. Investment trusts
make it convenient and cost-effective for individual
investors to obtain exposure to opportunities overseas
without needing to worry about different dealing costs,
languages or taxes.
For example, JPMorgan European Investment Trust plc
- Growth Shares’ underlying holdings include the world’s
biggest food company, the Swiss giant Nestle and
the French pharmaceutical group Sanofi. While many
aspects of the future remain uncertain, it is likely that
people will always want to eat and, require healthcare.
After more than 20 years managing this investment
trust, Stephen Macklow-Smith has extensive experience
seeking growth opportunities in Continental Europe (4).
INVESTING FOR INCOME INTERNATIONALLY
Income-seeking investors often rely on funds and
shares based in the UK, with its tradition of high
dividend distributions. But this ‘home bias’ may
inadvertently increase risk,
