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The £383m JPM Europe fund, AA rated by S&P, is managed by Jon Ingram, John Baker and Anis Lahlou-Abid, who together form part of JPMorgan Asset Management’s 40-strong European equity team. All the sub teams within the European group manage money using the same central philosophy, which is to look for stocks with attractive value and growth characteristics.

Paul Shutes acts as a client portfolio manager, whose job is to speak on the managers’ behalf. “We don’t handle money, but we sit on the desk with the fund managers,” says Mr Shutes. “Our job, effectively, is to be the mouthpiece for the managers so they can concentrate on running money.”

The JPM Europe is a higher-alpha fund with a relatively wide remit and few constraints in terms of sector, region or stock. Its objective is to outperform the FTSE World Europe ex UK index. “There are a few larger stocks we have to hold due to risk control,” Mr Shutes says, “but it is generally a best-ideas fund that aims to beat the benchmark by as much as possible.”

The fund’s managers use quantitative and qualitative analysis to identify market trends where investors have become too optimistic or pessimistic about a stock. During the technology bubble in the late 1990s, for example, the valuation multiples for many engineering companies and house builders were depressed simply because their names lacked the word “dot.com”.

The tendency of analysts to move as a herd creates another kind of valuation anomaly. If a company beats expectations, analysts tend not to upgrade the stock in unison. Instead, they upgrade incrementally, with one following another, and this creates opportunities the Europe fund team tries to exploit.

While the fund is built from the bottom up, the managers do consider certain top-down risk parameters, such as straying no more than 6 per cent from the benchmark in terms of region or sector. They also use a proprietary system that allows them to monitor the shape of the portfolio and its tilt toward various value and growth characteristics, such as beta positioning, liquidity and market-cap breakdown.

Over the longer term, performance has been quite strong. According to Morningstar, for the three-year period to 19 May, it returned 81.7 per cent compared with the sector’s average return of 67.2 per cent and the index’s return of 72.6 per cent. For the last five-year period, it returned 145.6 per cent against the sector’s 123.4 per cent and the index’s 134 per cent. Both performances placed the fund firmly within the first quartile over the respective periods.

More recently, however, performance has dipped due to difficult market conditions earlier this year. “A number of positions that made good money last year struggled when the market came off heavily in January, when a lot of people were taking profits,” Mr Shutes explains. “Since then, we’ve been making back that level of underperformance, and over the last three months, the fund is about 1 per cent ahead of the benchmark. But year-to-date, it is slightly behind.”

At the end of March, the fund’s top holding was France-based oil and gas producer Total, which accounted for 3.8 per cent of the portfolio. The company’s earnings growth has been very robust, and according to Mr Shutes, the stock has added a lot of value. “The company has been receiving upgrades, so the stock has been looking very attractive,” he adds. “That part of the market has been looking very good in terms of share-price appreciation.”

The second-largest holding, at 3.6 per cent, was Switzerland-based food group Nestlé. The company - which has made a big push into the emerging markets, particularly Russia - beat forecasts quite substantially in its latest report and has consequently received a number of upgrades. “This could be considered a slightly more defensive stock,” Mr Shutes says. “It has added value in the overall period it has been held, but, if you look at discrete periods, you will find it has gone in and out of favour.”

The third-largest holding, at 3.1 per cent, was Germany-based utility group E.on, another relatively defensive play. “This stock is not screamingly cheap, but it is not excessively expensive either,” Mr Shutes says. “It’s a relatively stable, defensive stock. Energy prices are generally rising, so earnings have been quite robust, and this has allowed the stock to hold up reasonably well over the January period, when most everything else was falling.”

The fund’s largest overweights by sector are oil and gas at 5.7 per cent and basic materials at 3.1 per cent, while the largest underweights are financials at 7.6 per cent, industrials at 6 per cent and consumer goods at 4.7 per cent. By country, the largest overweights are the Netherlands at 1.8 per cent and Greece at 0.9 per cent, while the biggest underweights are Germany at 3.9 per cent and France at 2.7 per cent.

With an initial charge of 4.25 per cent and annual management charge of 1.5 per cent, the fund’s TER of 1.67 per cent is 8 basis points higher than the sector’s average of 1.59 per cent.