While some doubt whether politicians have come any closer to formulating a resolution in the eurozone, for some the recent surge indicates the beginning of a sustained rally in equity markets.
FE Trustnet asked a panel of industry experts which open- and closed-ended funds they believe would prosper in this environment. Here is what they said:
Jupiter European Opportunities
"Alexander Darwall’s trust is one that keeps cropping up on investors’ portfolios of late, and with good reason," said FE Alpha Manager Peter Walls, who heads up Unicorn Mastertrust.
"He’s got an excellent record and I like the fact he’s got a fair bit of his own personal wealth in the portfolio, which I always look for in a manager because I like there to be an alignment of interests."
"It’s also on a good discount, which is a bonus."
FE Alpha Manager Darwall’s trust is the standout portfolio in its IT Europe sector. According to FE data, it is number-one over one, three, five and 10 years, and by some distance.
Performance of fund vs sector and index over 10-yrs
| Name | 1-yr returns (%) | 3-yr returns (%) | 5-yr returns (%) | 10-yr returns (%) |
| Jupiter European Opportunities | 29.17 | 111.86 | 49.5 | 327.3 |
| IT Europe | 6.75 | 29.21 | 6.43 | 157.72 |
| FTSE World Europe ex UK | 2.66 | 13.88 | -1.24 | 104.49 |
Source: FE Analytics
In the last decade, it has returned 327.3 per cent compared with 104.49 per cent from FTSE World Europe ex UK benchmark. The trust's closest rival – Henderson Euro Trust – has returned 206.62 per cent.
It is on a discount of 6.5 per cent and has a total expense ratio (TER) of 0.94 per cent. Darwall has headed up the trust since 2000. Walls also holds the Fidelity European Values trust in his Mastertrust portfolio, which is on a far wider discount of 12.9 per cent. Like Jupiter European Opportunities, it is a top-10 holding.
Standard Life UK Equity Unconstrained
Richard Troue, analyst at Hargreaves Lansdown, thinks Ed Legget’s £405m Standard Life UK Equity Unconstrained fund is one that is likely to do well when markets are on the up.
"It’s invested in cyclical companies, or those that are more dependent on the economy doing well," he said. "If you look at the league tables, it tends to be somewhere near the top during big spikes in performance."
Performance of fund vs sector over 5-yrs
Source: FE Analytics
In spite of a poor 2008 and 2011, the fund’s stellar performance during up periods means it has significantly outperformed its IMA UK All Companies sector average and benchmark over three and five years.
Between 2009 and 2010, Legget returned 175.85 per cent compared with 53.26 per cent from the average UK All Companies fund.
Standard Life UK Equity Unconstrained has a minimum investment of £1,000 and a TER of 1.9 per cent.
Smith & Williamson European Growth
"A particular area that could strengthen if there is greater stability in the eurozone is banking," continued Troue.
"Initially there is likely to be a significant relief rally and then if these companies have a bit of breathing space and can rebuild their balance sheets, we could see a very strong run."
"Mark Pignatelli is among the managers who have backed the banks and funds like his that are skewed in favour of these companies could do very well."
Pignatelli’s Smith & Williamson European Growth portfolio currently has 25.9 per cent in financials, which is his biggest sector position. He includes Santander, UBS and BBVA in his top-10.
In a recent note to investors, the manager showed optimism about ongoing developments in the eurozone.
"There has been some real progress with Germany and other AAA-rated countries committing their surpluses to support and finance debtor countries in the eurozone," he said.
"Furthermore, the ECB has hinted at its willingness to commit to a combined buying of sovereign debt with the ESM."
"Hence it seems that the politicians have made the first and critical leap in the direction of a full fiscal union. The fund is, accordingly, positioned to benefit from a normalising of valuation incompatibilities."
The fund has a minimum investment of £1,000 and a TER of 1.54 per cent. Since taking over as manager in December 2008, Pignatelli has returned 38 per cent – in line with the fund's sector average.
Henderson European Special Situations
For a more general play on Europe, Troue says he is a big fan of FE Alpha Manager Richard Pease’s Henderson European Special Situations fund.
"I like this portfolio because it focuses on high quality companies, many of which have little to do with Europe," he said.
"However, a lot of these stocks have taken a bit of a battering because of the turbulence in the region."
"It’s not just a dash-for-trash fund; it has exposure to some very good companies."
Performance of fund vs sector since launch
Source: FE Analytics
Pease’s fund has returned 21.23 per cent since it was launched in October 2009. This compares with 1.42 per cent from the average fund in IMA Europe ex UK and 7.89 per cent from its FTSE World Europe benchmark.
Threadneedle European Select
"If you’re confident of things being solved in the eurozone, then you’re best off going for a pure European fund," said Adrian Lowcock, senior adviser at Bestinvest.
"One that we like is David Dudding’s Threadneedle European Select fund, which has a good record in both up and down markets."
"Dudding is a very good stock picker, and though you do want someone who can make the most of the rally, his focus on quality also means there would be some reconciliation if things did take a turn for the worse."
According to FE data, Dudding’s portfolio has beaten the average European fund in each of the last four calendar years.
It has £1.1bn assets under management, a TER of 1.69 per cent and a minimum investment of £2,000.