European Assets Trust (EAT) aims to achieve capital growth over the long term through investing in small- and medium-sized companies listed in Europe (ex-UK). Over the past 10 years to end-June 2019, the trust has delivered an annualised NAV total return of 15.1%. EAT also has an attractive 5.6% dividend yield, significantly higher than its peers, reflecting the board’s high distribution policy. The trust completed its legal migration to the UK from the Netherlands in March 2019; previously dual-listed in London and Amsterdam, EAT is now solely traded on the London Stock Exchange (LSE) and is a constituent of the FTSE SmallCap and FTSE All-Share indices.
Economic growth in Europe is stalling, in large part led by its biggest contributor, Germany. This country’s exports sectors are facing significant headwinds, including structural challenges for its important autos industry, compounded by weaker global growth, rising US trade protectionism, and uncertain Brexit outcomes. The manager believes a fundamental approach to investing in companies that can achieve growth through economic cycles is the best approach in an uncertain environment.
Detailed bottom-up approach to building a well-diversified portfolio of c 40 highquality stocks, with a focus on valuation discipline and capital preservation. Good stock selection is typically the main driver for performance. EAT’s H119 NAV increase of 20.4% represented a c 4% outperformance vs the benchmark. This was overwhelmingly attributed to stock picking. Dividend yield of 5.6%, underpinned by the board’s high distribution policy.
EAT currently trades on a 8.1% discount to its cum-income NAV, which is significantly wider than its three-year average of 3.6%. Historically, the trust has typically traded close to its NAV, reflecting the board’s aim to minimise the volatility of the trust’s discount. It hopes EAT’s premium London listing and inclusion in the FTSE UK Index series will help attract new investors and improve demand for the trust’s shares.