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03 Nov 2020

TR European Growth

Company Notes

Outperformed in 2020 so far

Over the last five years TR European Growth* has delivered a NAV total return of +81.6%, outperforming its benchmark, the EMIX Smaller European Companies ex UK Index, which returned +63.6%. The fund was also the second best performer in the European Smaller Companies peer group over this period, outperforming European Assets (+43.0%) and JPMorgan European Smaller Companies (+67.5%) but underperforming Montanaro European Smaller Companies (+146.1%). OB acknowledged the fund’s underperformance of the benchmark in March this year (-20.5% vs -15.7%) as the portfolio contained exposure to a number of cyclical stocks, which suffered in the pandemic-induced market sell-off.

Despite the fund outperforming the benchmark in 2020 to date (+2.3% vs -3.1%), the manager expressed his disappointment that returns hadn’t been stronger. He attributes this to the fact that his investment process, which involves buying undervalued companies where the perception of the market is considered to be incorrect, has not been effective this year as expensive stocks have continued to increase in value. In the first nine months of the year, the majority of the top ten stock contributors to the fund’s performance were online businesses, while the largest detractors included companies negatively affected by the pandemic, such as banks and travel agents.

*TR European Growth is a corporate client of Winterflood Securities