JPMorgan European investment trust has announced "very disappointing" annual results for the year to 31 March 2020, struck by "negative sentiment to investing in Europe" combined with the coronavirus pandemic.
Total return to shareholders for the growth part of the portfolio was a loss of 16.3%, inclusive of share price movement and dividend income, compared with its MSCI Europe ex UK benchmark's loss of 8.3%.
Chair Josephine Dixon said the "main reason" for the portfolio underperforming the benchmark is due to its value bias, combined with the widening of discount.
Total return on the income part of the portfolio also far underperformed the same benchmark, down 27.5%, which Dixon attributed to coronavirus market turmoil, combined with the market's "initial shock reaction to both dividend cuts made by companies and in addition the possibility of future dividends being cancelled".
She also noted the timing of the year end being "very close to a low point" in the pandemic sell-off and highlighted that both portfolios have recouped a "fair amount" of these losses, but "the prospect of further turmoil cannot be excluded".
The investment style of the managers remains "fundamentally" unchanged as they "endeavour to protect dividends as far as possible" in the income share class, while the belief of the growth portfolio remains that market sentiment against value investing "will change at some point", at which time the fund will be positioned to benefit.
Managers Stephen Macklow-Smith, Alexander Fitzalan Howard, Michael Barakos and Thomas Buckingham said the performance was "dominated" by defensive stocks, particularly pharmaceuticals, technology and utilities, while laggards include energy, financials and autos.
Healthcare proved successful in the growth portfolio and despite a sharp correction, Roche still ended the year up 26%, proving a strong contributor to the fund, while Eckert & Ziegler anticipated strong earnings growth and saw its share price rise over 90% across the year.
In technology, Teamviewer proved a positive purchase, up 40% from its purchase in September, now rising to 75% at time of writing.
Airline stocks held within the growth portfolio proved a drag, with Airbus and Safran falling 48% and 32% respectively, joined in negative territory by Peugeot (40%) and Heidelbergcement (36%).
The income portfolio suffered headwinds due to its underweight in mega-cap defensive stocks proving "highly detrimental" with Roche, Novo Nordisk, Nestle and AMSL accounting for 3.4% of the underperformance.
Spanish electric utility Iberdrola, Norwegian electricity generator and distributor Fjordkraft and Finnish telecom firm Elisa all proved beneficial to the income portfolio, with the latter rising over 50%, much like Swiss pharmaceutical retailer Galenica, which also saw a share price increase of 50%.
The managers are confident about recovery in the medium term but acknowledge the likelihood of a "volatile few months", although they feel the next period "may see equity returns which are markedly higher than the thin gruel of the last five years".
Over the course of the year to 31 March 2020, the management fee totalled £3.4m, down slightly on the previous year, while the loss per growth share totalled 45.26p and the loss per income share stood at 34.61p.