Europe appears to be in fashion at the moment. Short-term tailwinds, such as euro weakness, monetary stimulus and the fall in oil prices, have all been factors which the market has looked upon favourably.
For those wishing to invest, the asset class has a number of compelling fund managers. They share common characteristics which we like to see: experience of companies and markets; consistency in the application of their investment philosophy and approach; well-constructed portfolios with a sensible view on risk and strategies that have proven to work over time.
Liontrust European Growth
Fund size: £33.5m
The managers of Liontrust European Growth, James Inglis-Jones and Samantha Gleave, follow a very objective investment process that rests firmly on fundamental research.
They do not believe meetings with management enhance their process, and consider the companies' reports and accounts are the primary data source that should be used for analysing stocks.
They focus on companies that generate a high cashflow and/or companies that are rapidly growing cashflows. Cashflow cannot be manipulated and the managers believe using this measure is far more reliable than others available to investors.
Investments are primarily in large- and medium-sized companies.
The fund may struggle when the market is favouring a particular style, but its long-term performance record is excellent and suggests the managers are identifying anomalously priced securities.
Baring Europe Select
Fund size: £7.1m
Baring Europe Select is managed by Nick Williams, who started running this fund in 2005. Historically, the small-cap segment of the European stock market has provided plenty of opportunities for active managers to add value.
Williams has spent his investment career following the more sensibly run companies in this space, and he has refined his investment process to capitalise on the opportunities.
The manager's real value-add for fund holders is not his ability to identify strongly performing companies, which he does, but is accessing these ideas in a manner which mitigates the downside risks, particularly in declining markets.
We remain impressed with the manager's sensible and proven investment style, and the fund is a solid choice for investors wanting to gain access to the asset class.
Fund size: £2.4bn
Fidelity European is a mainstream European equity fund run by a seasoned investor. The manager, Sam Morse, believes companies that consistently grow their dividends outperform the wider market over time. He is looking to accrue gradual outperformance over an extended period, and the strategy employed by him ensures the portfolio is made up of steady businesses.
Investments will typically be in larger-cap European blue-chips, and changes to the portfolio tend to be few and far between.
The fund is likely to underperform during periods of fast equity market moves and outperform in weaker, more volatile environments. But Morse has a history of acting as a safe pair of hands in the management of the funds that he has been in charge of.
Overall, the fund has plenty of appeal: an experienced manager at the helm, supported by a well-resourced team of analysts and a disciplined investment approach.
Artemis European Opps
Fund size: £225.2m
Artemis European Opportunities is a pragmatically run fund that aims to generate consistent, though not aggressive, outperformance of the market and does so by not being overly wedded to any one particular investment style.
Though the managers, Mark Page and Laurent Millet, would perhaps ideally like to always purchase high quality growth businesses, they appreciate there will be times when these look overvalued. As such, they will explore lower quality investment ideas but these need to be offering very attractive returns and at compelling valuation levels.
Though they will tend to lag certain peers when a particular investment style is in favour, they are likely to avoid the inevitable hangover when the trend reverses.
This fund could be viewed as an all-weather strategy, aiming to ignore market fads and focusing on delivering reliable returns each year.JPM Europe Dynamic ex UK.
JPM Europe Dynamic ex UK
Fund size: £461.1m
The JPM Europe Dynamic ex UK fund falls under the remit of JP Morgan's behavioural finance team, and is therefore managed using an approach which takes significant input from quantitative analysis.
The one common principle behind funds being managed in this way is by objectively assessing stocks, the emotional attachment that investors may have to companies and markets is removed.
A further characteristic is during periods when markets suddenly lurch into negative territory or benefit from a sharp positive change in investor sentiment, quantitative-based products tend to experience heightened levels of volatility, and often short-term returns can lag their peers who use more traditional approaches to investment management.
We like the fact the fund benefits from a well-resourced, highly experienced, and stable team that have adhered to the same investment philosophy since 1990. It is better suited for investors with a long-term investment horizon.
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