Tuite Dalton, who works at Oriel Securities, says that choosing the right stockpicker has been proven time and time again to be more important than choosing the right geography, and points to Darwall’s stellar record as evidence of this.
Over five years the MSCI Europe Index has delivered a 10.63 per cent total return; over the same period Jupiter European Opps has delivered an NAV total return of just over 49 per cent, and a total return of 87.77 per cent, according to FE data.
Performance of trust vs index over 5yrs
Source: FE Analytics
"The outperformance demonstrated by JEO [Jupiter European Opps] is not simply a reflection of leverage and good fortune," said Tuite Dalton. "We put much of JEO’s outperformance over the years down to [Darwall’s] experience, knowledge, focus and hard graft, which all add value."
"Darwall (pictured) argues that too many good fund managers either become plain lazy as they get old, have a tendency to delegate too much to inexperienced juniors, thereby losing touch with investee company management, or get distracted by macroeconomics and marketing.""With 5 per cent of the shares held in a personal capacity and a clear passion for doing what he does, and to the extent that he is rarely able to make time for marketing, we consider that Darwall’s focus is undiminished."
The Jupiter European Opportunities trust is currently trading on a premium of around 1 per cent, according to the AIC. The average IT Europe trust is on a discount of 9 per cent.
The five crown-rated trust has an ongoing charges figure of 1.19 per cent and does not have a performance fee.
On a management-style level, Tuite Dalton likes the fact Darwall focuses on flexible companies with a low cost base, a scalable business model, low capex requirements and international earnings, which he thinks makes him well suited to the current environment.
He also points to Darwall’s ability to find good opportunities in peripheral Europe as evidence of his stockpicking skills.
"Last year a number of wealth managers that we speak to avoided buying European equities, not as a result of their risk aversion but because they feared the negative reaction of their retail clients," he explained.
"For some, to buy something listed in Europe would have been totally out of the question, the assumption being that European companies must by definition be exposed to the European economy and its cash-strapped consumer."
"Both Alex Darwall at Jupiter and James Anderson [manager of the Scottish Mortgage Investment Trust] made money by owning companies listed in Spain last year."
"Darwall bought niche airline technology play Amadeus and Anderson held Inditex. They rose by 54 and 67 per cent respectively in the calendar year of 2012 against a broadly flat IBEX index."
Performance of trust vs index since Nov 2000
Source: FE Analytics
Jupiter European Opps has returned 263.06 per cent since Darwall took over in January 2000, compared with 38 per cent from the MSCI Europe index, and 57.14 per cent from its FTSE World Europe ex UK benchmark.
Although it uses the "ex UK" index as its benchmark, it can invest in UK firms and currently has a 35 per cent weighting to it.
Tuite Daltons points out that while there will be times when Darwall’s trust lags its benchmark, there are few better long-term plays.
"We remain positive on the long-term risk/reward balance and remain buyers of the trust," he said.
"We are confident that over the long-term, fluctuations in the premium discount rate should be modest in relation to the overall NAV return, and continue to believe that the closed-ended structure is helpful to its investment policy."