The manager (pictured) runs three open-ended European portfolios – Jupiter European, Jupiter European Growth and Scottish Widows HIFML European Focus – all of which have five FE Crowns. However, his investment trust stands head and shoulders above the rest, benefiting from his proven stockpicking ability, and gearing, which can be used to boost returns in a closed-ended structure.
The five crown-rated Jupiter European Opportunities IT was the only European vehicle to rank in the AIC’s top-20 most consistent investment trusts of the decade – apart from the European Assets IT, which is in the IT European Smaller Companies sector.
The trust has outperformed the FTSE Europe ex UK index in every calendar year over the last decade apart from 2007, when it was roughly even with the index, and 2008, when it took a heavy hit at the height of the financial crisis.
Year-on-year performance of trust vs index
| Name | 2012 (%) | 2011 (%) | 2010 (%) | 2009 (%) | 2008 (%) | 2007 (%) | 2006 (%) | 2005 (%) | 2004 (%) | 2003 (%) |
| Jupiter European Opportunities | 53.82 | -11.36 | 42.26 | 52.33 | -42.74 | 16.05 | 21.61 | 35.67 | 28.01 | 41.67 |
| FTSE Europe ex UK | 17.43 | -15.01 | 6.57 | 21.76 | -25.94 | 16.4 | 20.33 | 25.35 | 14.11 | 30.09 |
Source: FE Analytics
Over the last decade, the trust has gained an impressive 534.77 per cent, well ahead of the index, which picked up just 168.62 per cent.
Performance of trust vs index over 10yrs
Source: FE Analytics
It is trading on a premium of 0.9 per cent and has a small dividend yield of 0.5 per cent, according to the AIC.
The trust has ongoing charges of 1.19 per cent.
Darwall says the secret to his long-term success is his high-conviction approach to individual stocks.
The manager looks for strong-growth business models and then gets behind them for the long-term so he can run his winners through the cycle.
"Key to our performance over the last 15 years has been staying true to our approach – other managers may have added in financials in the 2005 to 2007 period, but we remained focused on business models," he said.
"This has also helped us stay calm at the top and bottom of markets."
Darwall's trust is currently 13 per cent geared.
Unlike his open-ended funds, Jupiter European Opportunities can also invest in UK companies – such as Croda and Experian – which have done exceptionally well of late and added to the already stellar returns on the trust.
The trust’s highest weighting is to UK companies – at 31.9 per cent.
"We’ve had a significant weighting to UK-based companies for some time, but please do not confuse where a company is listed with where it generates its profits," he said.
"Our exposure is the result of investment decisions to back certain global businesses which just happen to be based in the UK."
Darwall stresses the global theme in all of his portfolios, and says international companies have been the biggest value-add in his funds over the years.
"The bulk of our winners have been those flexible, global companies we tend to favour," he said.
"Intertek, the testing and inspection company, and Vopak, the Dutch-based chemical and oil storage company, have proved to be successful plays on the secular trend for rising world trade."
"We’ve also done well with a number of multi-national businesses, including Experian, Croda, Syngenta and Novo-Nordisk. They have all made a strong contribution to the trust’s performance."
While his largest sector play at the moment is in industrials, Darwall stresses that his outperformance comes down to individual companies.
He says there are five key characteristics he looks for in the structural growth companies he invests in.
1 – Strong underlying business model
"We look for companies involved in structural growth trends, ranging from the rising incidence of diabetes to the move towards using the internet for financial transactions or the growing body of legislation forcing businesses to make great use of recycling."
2 – Not constrained by governments
"Many indebted governments have found it all too easy to target captive, capital-intensive companies with new taxes to fill their depleted coffers. The most obvious targets are utilities, banks and telecommunications companies and we tend to avoid them."
"We choose instead to focus on companies with cost flexibility. These are firms that can relocate to low-cost countries to benefit from lower production costs or more favourable regulatory or tax regimes."
3 – International exposure
"We like companies that offer products or services that allow them to take advantage of growth opportunities beyond their European borders," Darwall said.
"International sales provide us with evidence that a company has a compelling offer for which customers are willing to pay."
4 – Unique niche in the market
"Our companies tend to have an abundance of intellectual property that makes them a unique proposition in the market," he said.
5 – Limited balance sheet debt
