Capturing the upside from Europe’s awakening: JPMorgan European Growth and Income

Capturing the upside from Europe’s awakening…by Alan Ray

Overview

JPMorgan European Growth & Income (JEGI) is a core European equity trust, aiming to provide consistent incremental outperformance of the benchmark over a variety of market conditions. The team managing the trust are primarily stock pickers and oversee a portfolio of c. 90 stocks selected using JPMorgan’s principles of quality, value, and momentum. Recently, JEGI’s portfolio has shifted subtly, reducing exposure to some of the global leaders that have dominated European equity portfolios for many years in favour of more domestically orientated stocks that are benefitting from positive changes in the outlook for Europe.

This shift in emphasis has helped achieve notable outperformance of the peer group and index in the first half of 2025, capping off strong performance over the last five years, where JEGI’s NAV and share price total returns of 92% and 116% respectively, are comfortable ahead of the benchmark’s 59%.

JEGI pays quarterly Dividends using a mixture of current income and reserves, setting the dividend rate for each year with reference to 4% of the closing NAV for the preceding year. This leaves the team to focus on capital growth and gives JEGI an additional role as a diversifier within equity income portfolios that would otherwise be constrained in taking exposure to European growth companies. With the current discount of c. 4%, the dividend yield at the share price is just over 4%.

JEGI is managed by an experienced team of three: Alexander Fitzalan Howard, Zenah Shuhaiber and Timothy Lewis. Alexander has managed JEGI since 2006, and Zenah and Timothy both joined Alexander as JEGI portfolio managers in 2020. The trust is modestly geared at c. 7%, in keeping with its ‘core’ objective.

Analyst’s View

JEGI is a core European trust, and investors should expect incremental rather than sudden change. In that context, the recent portfolio evolution is notable, with rising exposure to sub-€30bn market-cap companies over the last year and a distinct increase in underlying company revenues from domestic Europe. This is not a sudden lurch into small caps, more a reallocation into the lower echelons of large caps and into mid caps. What’s behind this? Broadly, we can say it is a consequence of the team finding more opportunities in domestically orientated businesses rather than in the mega-cap global companies that have dominated European equity portfolios for several years. In H1 2025, this evolution has translated to strong outperformance of the peer group.

This comes at a time when there are significant inflows into European equities from global investors, c. $40bn to the end of May 2025. Investors are, broadly, allocating to Europe first, because of the valuation discount to US equities. Second, rising unease about the US’s trade policy, causing investors to look elsewhere. And third, optimism that German government spending on infrastructure and defence will stimulate the industrial economy. JEGI’s exposure to companies like engineering consultant Bilfinger exemplifies this, with a 100% share price rise year to date and a market cap of c. €3.5bn. We’ve noted before that JEGI’s strategy can be considered ‘all weather’, with evolution a constant, and this year is an excellent example of that in action.
 

Bull

• Core European equity with a strong track record of consistent outperformance
• Dividend policy gives income seekers the opportunity to own a growth asset class
• European equities continue to trade at a significant valuation discount to the US

Bear

• Europe’s prospects for economic growth are weak
• Uncertainty over the US’s attitude to trade with Europe may take its toll on investor sentiment
• Gearing can amplify losses as well as gains

See the full research for JEGI here >

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan European Growth & Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.