Fund review: Jupiter European income

The performance of the fund has lagged the benchmark MSCI Europe ex UK index in the longer term, returning 69.34 per cent for the five years to October 16, compared with the index return of 83.43 per cent, according to Morningstar data.

In the shorter term, the fund has performed more in line with the index with a three-year return of 22.19 per cent compared with the index return of 22.34 per cent, although the one-year figure of 22.24 per cent is slightly behind the MSCI Europe ex UK index return of 26.64 per cent as the manager points out the past year has been one of two halves.

He explains: “The period from Mario Draghi doing his comments mid-way through last year to May/June this year when the US Federal Reserve started talking about tapering of QE, was a period where the search for yield was very much spilling over in to equity markets.”

The manager points out that while there has been a significant shift towards peripheral Europe, with strong equity inflows into areas such as Spain and Italy, this geographical rotation and sector rotation away from more defensive areas has not necessarily been reflected in earnings growth.

“In Europe, there has been zero earnings growth for three years now and we’re just going into the Q3 reporting season and we’ve had a number of profit warnings. I’m halfway between the two camps of focusing on quality for the long term and having a more cyclical peripheral Europe bias in the portfolio, because there is a growing risk of disappointment. You have to be very mindful of over exuberance when it comes to that trade into peripheral Europe.”

EXPERT VIEW

Martin Bamford, managing director and chartered financial planner, Informed Choice,

Verdict

“Manager Gregory Herbert has only been in situ for six months. This is too short a timeframe to fairly judge his contribution to the performance of the fund, which has not been stellar over the past six months. The fund has a reasonably low yield and high ongoing charges of 1.81 per cent. It is hard to see what it brings to the party at the moment. That said, Jupiter has an excellent European fund managed by Alexander Darwall, which we currently recommend to our clients, so there is no doubt potential here. It will be interesting to see whether Mr Herbert can deliver over the next three to five years.”