Most consistent funds of the decade: European Smaller Companies
In the first of a series, FE Trustnet looks at the most consistent funds in a highly volatile sector and region.
By Jenna Voigt, Features Editor, FE Trustnet
Thursday September 20, 2012
Threadneedle European Smaller Companies
is the only fund in its sector to deliver top-quartile returns over both five-year periods before and after September 2007, according to FE Analytics
The £968.7m fund, which sits in the IMA European Smaller Companies sector, has also outperformed its benchmark, the HSBC Smaller Europe ex UK index, over both periods.
In the five years to September 2007, the fund delivered a massive 253.35 per cent, outperforming its sector average by 41.23 percentage points.
It has been a more difficult time for European small cap managers in the last five years, but Threadneedle European Smaller Companies has still managed to return 36.95 per cent – more than twice as much as its sector average.
Performance of fund vs sector and benchmark over 10-yrs
Source: FE Analytics
Unsurprisingly, this has translated to top-quartile performance over the cumulative 10-year period; according to FE data, the fund has returned almost 384 per cent, compared with 242.35 per cent from its sector average. Its benchmark has returned 219.55 per cent over the period.
The portfolio, managed by FE Alpha Managers David Dudding
and Philip Dicken
, also has the best Sharpe ratio in the sector over 10 years – at 0.78 – and has delivered the highest level of Alpha over that period.
The Sharpe ratio shows the risk-adjusted performance of a portfolio – by measuring a fund’s return and that of a notional risk-free investment and then dividing the difference by the investment’s volatility – while a fund’s Alpha is the extra returns it makes over the performance of the market it invests in.
Jason Hollands, managing director at Bestinvest, says the fund is one of two on the firm’s Premier Selection list of recommended funds for the sector.
"David’s style is very much to the traditional stock-picking side. He also has a growth bias and a strong emphasis on face-to-face meetings with companies which we think is very, very important when it comes to investing," he said.
"The portfolio has also benefitted from being heavily anchored to the stronger European countries, with the core focus of Germany, France and Switzerland, and very underweight the troubled periphery."
Among the four crown-rated fund’s top holdings are Germany-based bank and independent vendor leasing company Grenkeleasing and French telecommunications firm Iliad.
The portfolio is biased toward industrial stocks, with more than 36 per cent of assets under management in the sector, and is also overweight healthcare, basic materials and consumer product stocks.
Dudding has managed the fund since September 2002, while Dicken joined as co-manager at the height of the financial crisis in 2008.
It carries a minimum investment of £2,000 and has a TER of 1.69 per cent.
Most consistent funds of the decade – European Smaller Companies
Source: FE Analytics
|Threadneedle European Smaller Companies
|Baring Europe Select
The £320.1m Baring Europe Select fund was the second most consistent in the sector over the period, delivering top-quartile returns over the five years prior to 18 September 2007 and second-quartile returns afterwards.
The top-performing fund in the sector over the initial five-year period, Henderson European Smaller Companies
, fell to the bottom quartile in the five years following September 2007.
MFS Meridian European Smaller Companies has the sector’s second-best Sharpe ratio over the decade, at 0.70.