As such, there could be further volatility in share prices for stocks trading on both sides of the Channel. Despite this, volatility and uncertainty in the short term could prove to be long term investment opportunities, as wider margins of safety may mean risk/reward ratios are more favourable at the present time. With that in mind, here are two investment trusts which could be worth a closer look right now.

Strong performance

Reporting on Friday was Strategic Equity Capital (LSE: SEC). It has enjoyed a strong performance in its most recent financial year, with its net asset value increasing by over 29%. This is ahead of its benchmark index by around 1%, and further outperformance could be ahead.

With all of its invested assets in UK-listed stocks, the company may lack the geographical diversification offered by other investment trusts at an asset allocation level. However at a company level, it offers some geographical diversity, although since it focuses on smaller companies this may be relatively limited.

That said, Strategic Equity Capital appears to offer upside potential. Its share price continues to trade at a discount to net asset value, with the discount being around 15% at the present time. Furthermore, the outlook for the UK economy may create investment opportunities over the medium term. Wider margins of safety may be on offer, and this could create a buyer’s market where risks are lower and potential returns are higher.

Diverse offering

While all of Strategic Equity Capital’s holdings may be UK-listed stocks, TR European Growth Trust (LSE: TRG) has a range of companies from across Europe in its portfolio. It is most exposed to German equities, with over 19% of its holdings listed in Europe’s largest economy. Beyond this, it has a mix of exposure to other leading European economies including France and Italy. This provides it with a high degree of diversity within Europe which could help to lower its overall risk profile.

With the company having outperformed its benchmark by around 111% in the last five years, it has an excellent track record of growth. Its top 10 holdings make up around 15% of the total portfolio. This suggests it is highly diversified even at a company level, and may be a sound means for an investor to gain access to a wide range of European stocks in a number of different countries.

Certainly, a tapering of QE next year by the ECB could lead to pressure on the region’s growth rate. But with international diversification and a strong track record of growth, TR European Growth could help its investors to generate a seven-figure portfolio in the long run.

Micro cap stocks

The River and Mercantile UK Micro Cap Investment Company (LSE: RMMC) is one of only a few funds which primarily focuses on some of the smallest UK companies on the stock market. It aims to achieve long-term capital growth by investing in companies with a market capitalisation of less than £100m at the time of purchase.

Although the fund is relatively new, launched less than three years ago in December 2014, it has so far performed well. The investment company was one of the top-performing small-cap funds over the past year with a 12-month net asset value (NAV) return of 47.8%, which compared favourably against the Morningstar UK Smaller Companies category performance of 26.2%.

Greater scope for growth

Portfolio manager Philip Rodrigs reckons the smaller the initial size of the company at the point of investment, the greater the scope for growth. Micro caps are one of the less-researched areas of the market, meaning diligent investors may earn big returns from finding small, quality companies that have been undervalued for a long time before being discovered.

The fund’s outsized exposure to the technology sector, which accounts for 29.7% of its portfolio allocation (against just 8.9% in the benchmark index), has no doubt played a big role in the fund’s performance. However, looking ahead, it’s important to be wary of the fund’s concentration risks. Although the UK technology sector is in good health at present, high valuation multiples among many tech stocks may limit further upside potential.

The fund is also meaningfully overweight in the oil and gas sector, which represents 11.5% of its assets — compared to the benchmark weight of 4.5%. And as a result, the fund is underweight in a number of other sectors, most notably industrials and financials. Top holdings include Microgen (5.9%), Taptica (5.4%), Blue Prism (5.2%), MaxCyte (4.8%) and Ideagen (4.4%).

European small-caps

For investors looking to diversify away from UK stocks, the TR European Growth Trust (LSE: TRG) is perhaps a better pick. The Janus Henderson trust invests primarily in smaller and medium-sized European companies, with the same aim: to achieve long-term capital growth.

The top three country exposures are Germany, France, and Italy, which represent 19.4%, 12.3%, and 11.5% of its portfolio, respectively. The trust also invests most heavily in the industrial goods sector, carrying a hefty 23.6% exposure to it. Top holdings include Van Lanschot Kempen (2.3%), Brainlab (2.2%), FinecoBank (1.7%), Anima (1.3%) and Lenzing (1.3%).

Further to run

Ollie Beckett, who has run the fund since 2011, reckons the European recovery story has further to run. Despite the narrowing valuation gap between US and European stocks over the past year, he believes there are still undervalued growth opportunities in the market.

The TR European Growth Trust is a top-quartile performer, with a five-year cumulative NAV performance of 230.8%. Its stock performance is even more impressive, with a total share price return of 320.9% over the same period, thanks to a narrowing of its discount to NAV from roughly 20% in 2012, to currently less than 1%.