The stock markets of Europe offer investors a dazzling array of blue-chip brand names, with thousands of companies to choose from.
Alex Darwall, manager of the Jupiter European Fund, uses his 23 years of experience to good effect in constructing a portfolio of 30-40 holdings.
When challenged about the perceived risks of such a concentrated portfolio, Mr Darwall said: “The fund offers investors a collection of really good businesses with very strong characteristics.
“The number of holdings does not mean the portfolio lacks diversification.
“If I owned hundreds of companies and 25 were banks, I’d be exposed to the systemic risk of that sector. I own companies that have no link to each other. They happen to be based in Europe, but they are global leaders.”
The concept of geographic asset allocation based on index weightings is completely out of date, according to Mr Darwall.
He said: “When I see this elsewhere, I question whether the people adopting this strategy really understand how international companies work.”
Where a company is based is far less important to Mr Darwall than the quality of the management and whether it has a competitive advantage.
He said: “Take Syngenta for example. I don’t think of them as a Swiss company. They have an American CEO and a truly global business model.”
The manager takes a long-term view with his investments.
He said: “I’m an investor, not a speculator. There are some companies I haven’t sold yet that have been in the portfolio since I took over in 2001.”
Mr Darwall meets the management of the companies in the portfolio regularly and is not afraid to sell a holding if he loses trust in them.
He said: “Typically I would turn over around 30% of the portfolio each year, with 10% being due to takeovers, 10% trimming and 10% where it simply hasn’t worked out.”
The largest holding in the portfolio is Novo Nordisk.
Mr Darwall said: “This company is the biggest producer of insulin in the world, with a 51% market share. Type 2 diabetes is a truly global phenomenon as the diet of the developing economies becomes more westernised.”
The Jupiter European Fund delivered a return of 46.8% over the 12 months to November 19.
Barry O’Neill is a chartered financial planner with Thomson Shepherd. Contact him on 01224 619215