The Fidelity European Trust (LSE: FEV), now a £2.2 billion investment trust following a merger, has seen its performance lag the FTSE Europe ex-UK index over recent periods. Over the past year, it has been 10% behind the index, 13% over three years, and 12% over five years.
Marcel Stötzel, the trust's lead manager, acknowledges challenges such as poor demographics, low productivity, and high government debt in Europe. However, he remains optimistic about European stocks, noting that only a third of their turnover comes from Europe.
Stötzel identifies five reasons for his positive outlook: Germany's lifted fiscal brake, Mario Draghi's report on EU competitiveness, a large savings rate, increased European defence spending, and tightening European integration. He anticipates that the GDP growth gap will not continue to widen and the trust is currently overweight domestic Europe.
The previous lead manager, Sam Morse, attributed last year's performance to limited exposure to defence stocks and holdings in Novo Nordisk, Symrise, and SAP. Novo Nordisk's share price reportedly crashed 75% from its mid-2024 high after soaring due to its weight-loss drug Wegovy, before a slight recovery. SAP has faced concerns about AI disruption.