Sometimes, I'll admit, I'm at a loss as to where best to invest.
Take today for instance. The US stock market continues to climb, brushing aside the latest tit-for-tat on trade wars between China and other 'allies' in Europe.
Emerging markets are slightly better value but the strength of the dollar and rising interest rates in the US are a headwind – as they are too for fixed income.
Property yields aren't brilliant and Brexit worries have put a dampener on the market, while commodities just aren't what they used to be: oil is up a bit and gold has its uses, but there's definitely nothing screaming 'buy'.
Here in the UK we've just marked the second anniversary of deciding to leave the EU, with very little decided and a stalemate looming – along with our exit date of March 2019.
The manager and his supporting team have developed a real aptitude for recognising patterns of success in company business plans and management teams.But the UK stock market is being very British about it all and 'carrying on regardless'. Nothing appears very appealing, to be frank, and I am just looking to top up existing investments on any market dips that occur.
But being 'neutral' doesn't make for very good copy. So it's at times like this that investing in a manager that does have high conviction can be rewarding.
Alexander Darwall is one such manager and he has a number of portfolios to choose from.
I particularly like his open-ended Jupiter European fund, but this best in class is all about his investment trust, Jupiter European Opportunities.
Mr Darwall is a truly talented stockpicker and is well-known for having a high conviction portfolio. His top 10 positions have consistently represented 63 per cent of the portfolio, on average, over the past five years and currently stand at 71 per cent.
Investing in this way means each investment has a meaningful impact on performance, although this is a higher-risk approach and could produce negative, as well as positive, results.
According to Jupiter Asset Management, 15.8 per cent of the portfolio's total assets are invested in his top holding, Wirecard.
One of the attractions of the investment trust structure is that it allows for such high-conviction holdings, whereas an open-ended fund is restricted to a maximum 10 per cent.
Wirecard is a German-listed payment services company, not dissimilar to WorldPay. The company has been a holding in the portfolio for over 10 years without interruption, and Mr Darwall has added to the position over time.
The key attributes of the business model were already present in 2007, but the business has since developed in several ways.
His conviction was tested in 2016 when the stock was the victim of an activist short campaign and the share price fell some 25 per cent. The accusations were investigated and were not upheld. The stock rebounded and was one of the biggest contributors to portfolio performance the following year.
The manager and his supporting team have developed a real aptitude for recognising patterns of success in company business plans and management teams.
They believe in finding quality where the market might have missed it and have an emphasis on secular, not cyclical, trends and companies that are able to weather the full business cycle. They simply aim to uncover some of the continent's greatest success stories – before they have unfolded – and watch them grow.
This means the portfolio often contains stocks in media, healthcare, technology and industrials sectors and, from time to time, retail and financials, but rarely in sectors such as commodities, utilities or real estate.
Mr Darwall navigates systemic risk by avoiding macro views and concentrates solely on stock specific risk. Stock overlap is avoided by ensuring sector and geographical diversification and stock risk is further mitigated by holding uncorrelated companies.
His approach has worked exceptionally well over the long term and he has built one of the most successful track records in his sector.
He has managed the trust since its launch in November 2000 and, over that period to 20 June 2018, has returned 741.6 per cent for shareholders, according to data from FE Analytics – more than double the IT Europe sector average of 302.4 per cent, and more than four times that of the FTSE World Europe ex UK index, which gained 173.3 per cent over the period.
Darius McDermott is managing director at FundCalibre
