European funds: investors have 'a luxury of choice'
A series of mergers is bringing consolidation among European funds, but investors should benefit, says Max King

Last year, Henderson European Focus Trust and Henderson EuroTrust merged to form Henderson European Trust (LSE: HET), with £680 million of assets (after significant cash exits) and a well-regarded management team in charge. Just a few months later, though, the co-managers left Janus Henderson, and the combined trust will now be merged into the larger Fidelity European Trust (LSE: FEV).
The three- and five-year investment records of FEV and HET are already very similar at 33% and 74%. This is behind JPMorgan European Growth & Income (LSE: JEGI), on 46% and 99% respectively, but ahead of the rest of the sector. The enlarged FEV, with £2.1 billion of assets, should now have better liquidity and will aim to maintain a mid single-digit discount to net asset value (NAV). Fees should be lower, and the dividend yield moderately higher.
On the negative side, an average holding size of nearly £50 million for the 45 holdings will severely limit the ability of FEV to invest in smaller companies. This has not been a problem in recent years, with smaller companies underperforming, but it could be in the future. Investors may want to hold a European smaller companies specialist trust as well.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Focus on growth
FEV looks for companies that produce improving dividend growth “as this indicates steady structural growth”. Their criteria include a good performance record, a good return on capital, the ability to generate cash and structural but not acyclical growth. This is summed up as “good quality at a reasonable price”. They dislike companies with high levels of borrowing.
The focus is on stockpicking rather than reading the macroeconomic or geopolitical tea leaves. “Although the outlook for continental Europe is uncertain and faces challenges, we are excited about the prospects for the individual companies in which we invest,” says co-manager Sam Morse. “European companies have often kept pace with global indices because they are less and less reliant on the domestic European economies – two-thirds of sales and profits now comes from outside Europe.”
Stocks are generally held for three to five years, with no holding over 4% of the portfolio. The largest holdings – SAP, Roche, ASML, Nestlé and L’Oréal – reflect a bias to growth, but banks, energy and basic materials are also well represented. These top five explain why FEV has fallen behind JEGI in the last year – ASML, Nestlé and L’Oréal had a miserable second half of 2024, falling 25% in value on average. Only Nestlé has had a respectable (but dwindling) recovery in 2025, rising 9%.
First-rate European funds
Both FEV and the smaller JEGI (£525 million of net assets) are first-rate funds trading on low discounts to NAV. JEGI has the higher dividend yield at 4% against 2.25% for FEV, supplementing its income with payments from capital. Exposure to smaller companies is via a holding of 2.5% in its sister trust, the £640 million European Discovery Trust (LSE: JEDT), whose performance has been revitalised in the past year by management changes.
JEDT’s largest rival in the sector has been the European Smaller Companies Trust (LSE: ESCT). This trust recently bought back 42% of its share capital following a hostile takeover attempt by Boaz Weinstein’s Saba Capital (which sold its 30% stake in the buyback), but is now regaining scale by absorbing the dismally performing European Assets Trust (LSE: EAT). This will take net assets back up to £780 million, providing better scale and liquidity and lower management costs. However, the decision to double the dividend yield to 5% by paying out of capital looks impetuous.
The European trust sector may be shrinking but in both the mainstream and smaller companies sector, investors still have the luxury of choice.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.
After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.
-
HMRC warning after scammers target 170k taxpayers – how to stay protected
Scammers are using increasingly sophisticated methods to trick people into sharing personal details or paying for fake self assessment tax refunds
-
Average homes in every English region are now liable for stamp duty – how much will you pay?
As average house prices in every English region are now above the stamp duty threshold, we look at how much tax you will pay.
-
What we can learn from Britain’s "Dashing Dozen" stocks
Stocks that consistently outperform the market are clearly doing something right. What can we learn from the UK's top performers and which ones are still buys?
-
Europe’s forgotten equities offer value, growth and strong cash flows
Opinion Jonathon Regis, co-portfolio manager, Developed Markets UCITS Strategy, Lansdowne Partners, highlights forgotten equities he'd put his money in
-
How retail investors can gain exposure to Lloyd’s of London
It’s hard for retail investors to get in on the action at Lloyd’s of London. Here are some of the ways to gain exposure
-
The flaw in Terry Smith’s strategy at Fundsmith
Opinion Fundsmith has invested in some excellent companies, but it has struggled to decide when to sell, says Max King
-
Picton Property: a deep-value property play
Picton Property has all the qualities of a future takeover target
-
How to invest in the travel industry's boom as tourists get back on the road
The travel industry is in rude health despite uncertainty about the global economy, Trump’s policies and geopolitical concerns. Investors should buy in now
-
First Solar is set to shine – should you invest?
Solar-power specialist First Solar will benefit from Donald Trump’s policies, says Matthew Partridge
-
Profit from the potential in funds focusing on private assets
Opinion Charlotte Cuthbertson and Tom Treanor of the Migo Opportunities Trust highlight three funds where they'd put their money