European Assets Trust (EAT) aims to generate long-term capital growth by investing in a concentrated but diversified portfolio of small- and medium-sized European companies. Managers Sam Cosh and Lucy Morris have seized the opportunity created by the Q1 market sell-off to enhance the quality and growth characteristics of the portfolio. Recent performance shows that their actions are already paying off and they are confident that EAT has the ability to keep delivering solid returns to investors not just short-term, but also over the long-term. EAT’s high payout policy and a recent fee reduction have the potential to enhance its investor appeal.
Investors seem confident that the European economy will continue to gather momentum after the Q1 sell-off, although persistent health, economic and political risks have the potential to spark renewed financial market volatility in coming months. However, European stock valuations appear attractive on several measures, suggesting that investors seeking exposure to European equities and diversification away from the UK may find value at current market levels.
- Solid absolute returns over most periods shown on page 8 and long-term performance ahead of the benchmark and the UK market.
- Board commitment to a high dividend payout policy.
- A recently reduced management fee.
EAT’s shares are currently trading at a 6.3% discount to cum-income NAV. This compares to an average of 8.7% over the past year, and averages of 5.3%, 3.9% and 4.8% over three, five and 10 years respectively. The board is committed to managing the volatility of the discount. It believes that the migration of the trust to the UK in March 2019 will broaden its investor base and combined with the high dividend payout policy and a recent fee reduction, may help EAT’s discount return to its narrower historical levels over time.