Fidelity European Trust – the £2bn core European equity trust

Fidelity European Trust (FEV) is the largest European equity investment trust, with net assets of over £2bn. It has a long track record of outperformance, generating an NAV total return of 150% over the last ten years (to 22/10/2026), ahead of the benchmark’s 143%. More recently FEV’s quality growth style has faced headwinds, with markets favouring value over growth stocks, and the trust has underperformed. However, an active approach to managing the discount using share buybacks means that it has maintained its mid-single-digit Discount target during this period. FEV has also delivered annualised dividend growth of 8.8% over the last five financial years and at the half-year stage for the current year delivered a similar level of growth for the interim dividend.

In November 2026 Managers Sam Morse and Marcel Stötzel were joined by Alexander Laing as part of the team. Alexander is an experienced analyst and fund manager at Fidelity, and his appointment marks the beginning of a transition period ahead of Sam’s retirement in October 2027. There are no plans for any changes to the investment process or philosophy.

One of the distinctive features of the team’s approach is their focus on company dividends. FEV is not an equity income trust, and the team are not set any revenue goals, but they view a company’s ability to pay and grow a dividend as an important first step in their process. Typically, the portfolio yield is slightly lower than the market average, reflecting the team’s preference for growth businesses that command a premium rating. More recently though, with value outperforming, FEV’s portfolio yield is, unusually, at parity with the benchmark, which the team sees as a strong signal that the portfolio is undervalued.

There’s a table in the Portfolio section that shows some key valuation metrics for FEV’s companies compared to the benchmark index and it’s a striking picture of higher growth, better return on capital businesses trading at almost the same forward P/E as the market. European stock markets are a little less ‘under the radar’ for UK investors than they were a couple of years ago due to strong performance but there’s a small irony in the fact that this has been driven by value stocks, for which one can, simplistically at least, read ‘domestic’ businesses, when the longer-term case for investing in Europe is really all about the successful global businesses that often trade on lower multiples than, say, their US counterparts. Whereas European equities remain on a discount to equivalent US equities, it’s perhaps even more interesting that those successful global businesses are increasingly trading in line with the wider European equity market. That situation, we think, won’t last forever and a resurgence in interest in these companies could quickly reverse FEV’s short-term underperformance.

Being in a slightly out-of-favour position can, of course, lead to a discount to NAV. In the Discount section we see how FEV has maintained a narrow, currently 5%, discount, with an active approach to buybacks. It’s possible that this very mature approach to discounts might be a slight disappointment to the contrarian investor who likes to pick up shares at a discount, but we think those with a contrary mindset should be paying very close attention to that table of financial metrics as that’s where we think the real discount story lies.