His trust is up 54.8 per cent in share price terms over the period, helped by a narrowing discount and an increased exposure to domestically focused stocks.
Beckett (pictured) says that he expects this sector of the economy to continue to outperform, with the peripheral markets doing particularly well. "From about March this year I took the fund more exposed to domestic Europe. This has been changing in ways that if Europe was democratic probably couldn’t have occurred," he said.
"The Germans have imposed on Greece and Spain things that they couldn’t have imposed on east Germany, because they don’t have a vote in the Bundestag, which means a number of these countries have taken the pain and you are seeing the rebalancing you needed to see."
"You are seeing countries relocate their IT departments from Munich to Barcelona. Yesterday we started to see some implementation in Italy of labour reforms that are much needed."
"France is the country where you aren’t seeing a huge amount of change, but France isn’t Spain, it’s not highly leveraged, loans to houses is relatively low, there aren’t one million unsold homes."
"France will merely be a drag on the European economy, but as the global economy improves, France will be dragged up with it."
"Things are getting better at the margin. I think you are going to see a slow recovery. Domestic-focused stocks have been seeing the earnings upgrades."
Data from FE Analytics shows that the trust has significantly outperformed both its benchmark and the average open- and closed-ended funds in the sector over the past year.
Performance of trust vs sectors and index over 1yr
Source: FE Analytics
That performance has taken the trust ahead of the index since Beckett took over in July 2011, although it has still slightly underperformed the sector average.
This has to be put in the context of a sector of only four portfolios and the manager having to refashion the portfolio how he wants it.
Performance of trust vs sectors and index since July 2011
Source: FE Analytics
The manager says that when he took over the trust, he needed to make considerable changes to adapt it to the composition he wanted.
"When I took the trust over I needed to strengthen the core of the portfolio with high return on capital companies – I won’t say 'high quality', the term doesn’t make sense to me. It’s a perception of a moment in time – things change."
"Nokia is no longer a quality company, but 10 years ago people would have said that."
"I am trying to find undervalued stocks but that doesn’t mean I am a value investor."
"What I don’t have is stocks people would describe as 'reasonable growth' on 22 to 26 times earnings. I don’t believe these stocks go to 30 times earnings for fairly limited growth."
"I want to be exposed to domestic Europe. The good thing is that I did it early, from the spring at least, and that has worked in our favour."
Beckett acknowledges that the work to turn the portfolio into his own is not 100 per cent complete.
The top-two holdings are both private equity investments that the manager wants to jettison.
Brainlab, in which he has 2.6 per cent of the fund, is a private company that runs highly specialised laser equipment used to carry out brain surgery.
The founder has a controlling stake and is not currently prepared to sell; Beckett, along with other major shareholders, is trying to persuade him to do so.
The second-largest holding is 21 Centrale Partners, a French private equity fund that is winding down and selling off its investments.
These unquoted holdings are one reason why the trust trades on a slightly wider discount than its peers.
AIC data shows it is on a discount of 12.8 per cent compared with 12.1 per cent for Montanaro European Smaller Companies, 12 per cent for JP Morgan European Smaller Companies and 2.7 per cent for European Assets – which yields 5 per cent.
The trust’s NAV returns of 43.5 per cent are behind the 45.3 per cent made by the JP Morgan fund and the 47 per cent made by the European Assets Trust.
However, all three are well ahead of all but one equivalent open-ended fund over the period.
The £22m Ignis European Smaller Companies fund has made 45.52 per cent while the next-best fund, JPM Europe Smaller Companies, has made 39.7 per cent and the third, Schroder European Smaller Companies, 36.36 per cent.
The manager says that he aims to generate ideas that make his portfolio different from its peers.
Typically, companies promote themselves around the time of their yearly and half-yearly results, and do the rounds of investors at this point.
Beckett says there are numerous ways he and his team try to break this pattern.
"We don’t want to be led by investment banks into seeing certain companies, so we do our own screening (using the Holt system)."
"And we try to talk to companies out of sync. A lot of companies come round after their results. Better to try and see them when you are the only meeting of the day."
The trust faces a continuation vote at the AGM in November – as it does every three years – but Numis analysts think that investors will remain supportive following its recent strong performance.
The manager says that he does not want to drop the performance fee on the trust to lure those retail investors who disapprove of them.
"As an investor that’s how I would prefer to pay," he said. "We have the lowest AMC in the sector and we are paid by results on top of that."
The trust has a base fee of 0.5 per cent, and ongoing charges are 0.73 per cent inclusive of the performance fee.
