This research throws into question whether investors are fully aware of how much exposure they have to the continent.
According to data from FTSE Group, the Europe ex UK region makes up 16.48 per cent of the FTSE World index.
Our research shows that eight of the 10 top-performing IMA Global Equity Income funds over three years hold more than that in the region, including multi-billion pound giants Newton Global Higher Income and Veritas Global Equity income.
Three of the top-five IMA Global funds also have a higher exposure to the continent, while in total, 16 out of the 26 Global Equity Income funds are overweight the region and 74 out of the 246 global funds are too.
Top-performing Global Equity Income funds overweight Europe
| Name | 3-yr performance | Rank | % in Europe ex UK |
| Invesco Perp - Global Equity Income | 41.34 | 1 | 25.97 |
| Newton - Global Higher Income | 36.58 | 3 | 27.69 |
| Veritas - Global Equity Income | 35.94 | 4 | 17.3 |
| Lazard - Global Equity Income | 32.36 | 6 | 29.7 |
| Schroder - Global Equity Income | 31.62 | 7 | 39.44 |
| Aberdeen - World Growth & Income | 30.28 | 8 | 19.4 |
| Stan Life Inv - Global Equity Income | 28.98 | 9 | 20.8 |
| Sarasin - International Equity Income | 26.23 | 10 | 20.58 |
Source: FE Analytics
Managers say that the region offers excellent companies that derive their earnings from a wider base than just Europe and that have been driven to lower valuations due to concerns about the eurozone.
Andrew McMenigall, senior investment manager on the Aberdeen World Equity fund, which has 23.2 per cent in the Europe ex UK sector, said: "Despite the multi-year problems Europe's economies face, the continent remains home to some world-class companies."
"In the wake of the 2008 crisis, many non-financial European companies strengthened their balance sheets and repaid debt. Many of these companies have geographically diversified businesses."
"However, while the quality of European companies is an attraction, investors need to be vigilant. Given the slowing growth environment around the world, earnings may not meet expectations and share prices are likely to remain volatile."
Stefan Angele, head of investment management at Swiss & Global Asset Management, says his firm is overweight the continent in its global portfolios despite having a bearish view on the prospects for the eurozone crisis and the region’s economies.
He said: "There are very attractive corporate bonds in Europe. We focus on healthy corporates with international distribution markets."
"Exactly the same is true of European equities and we are overweight that asset class. Not that we are overweight the Eurostoxx 50, which has lots of financial stocks in it, but we find attractive bottom-up companies that are little-affected by the eurozone crisis."
The Threadneedle Global Equity Income fund is the second-best performer in the sector over three years, and unlike the majority of its peers is underweight Europe ex UK.
The fund’s manager Stephen Thornber explains that his strategy is fundamentally bottom-up, and this provides the primary reasons for the underweight position.
However, he explains that poor macro-economic circumstances in Europe contribute to the stocks’ relative unattractiveness.
He said: "We continue to see headwinds for European economies and markets. Whilst there are plenty of companies with attractively high yields in Europe, weak economic activity, a stressed banking system and on-going austerity measures continue to overhang European markets."
"Fundamentally, we feel many high-yielding European companies are over-distributing and at risk of having to cut their dividend payments – as we are currently seeing in the European telecommunications sector."
"Outside of Europe we are able to find attractively valued companies with high yields, sound balance sheets and growth potential."
The Europe ex UK sector has been the worst-selling to retail investors for three out of the last six months, according to IMA figures, and Richard Troue, investment analyst at Hargreaves Lansdown, says that FE Trustnet's findings underline the importance to investors of investigating any global funds they hold.
He said: "With a global fund it’s certainly worth doing your homework to see where it has its biggest holdings. If you really don’t want to have exposure to those areas, you can then consider alternatives."
However, he adds that having a global manager making the decisions on whether a region or asset is fairly valued is a major benefit of buying such a broadly focused fund, and may have worked well for retail investors in this case.
Retail investors can find it hard to buy into regions that are suffering such a bad press as Europe is right now, he explains, but the continent’s companies have actually been doing well.
"The bigger picture surrounding Europe remains dismal, but European stock markets have performed well, the smaller companies particularly, so it’s not surprising to see that reflected in the performance data of the funds," he said.