The heady promise of an extra €60bn being pumped into the economy each month left investors jumping for joy, with the MSCI Europe index gaining 1.31 per cent on the day of the announcement. Since 22 January, the index is up 6.13 per cent in euro terms, despite the election of anti-austerity party Syriza in Greece.
What’s more, eurozone finance ministers have now approved Greece’s proposals for a bailout extension and progress seems to be getting made in easing the strict conditions attached to this, potentially strengthening the next leg of a European equity rally.
It’s been over a month since QE was announced and, even though it’s a very short time frame on which to judge investments, FE Trustnet examines the funds that have done the best since.
(Just a note: all the figures are in sterling, so they will be different to reports quoting the market’s performance in euros)
FP Argonaut European Enhanced Income
Oliver Russ’ £60m FP Argonaut European Enhanced Income fund has returned 7.40 per cent since Draghi’s announcement, compared with an average gain of 3.34 per cent from the IA Europe ex UK sector.
However, the four FE Crown-rated fund’s outperformance is just a feature of the recent rally. It’s currently in the first quartile over one and three years and has returned 51.11 per cent since launch in April 2010, beating the sector by six percentage points and the index by 12 percentage points.
Performance of fund vs sector and index since launch
Source: FE Analytics
Russ, who was formerly at Neptune until 2004, uses a long-term value, income-focused approach to achieve a high yield.
The fund’s largest overweight is to financials, which would be expected to be a natural beneficiary of QE, with 11.8 per cent more than the index in this area. Among its major holdings are Allianz SE, Swedbank and Norwegian insurance company Gjensidige Forsikring.
It is also overweight Italian equities, which could also benefit if investor sentiment towards Europe started to improve.
Argonaut European Enhanced Income has a clean ongoing charges figure (OCF) of 0.98 per cent and yields 4.29 per cent.
Neptune European Opportunities
Despite beginning the year poorly, Rob Burnett’s Neptune European Opportunities fund is the second highest-performing fund since the QE launch with a return of 6.66 per cent.
The fund has faced a difficult few years after Burnett positioned his portfolio for a recovering Europe, with large bets towards troubled economies like Italy, France and Spain – the fund’s three large country weightings.
This means the fund is currently in the sector’s fourth quartile over one, three and five years. However, commentators frequently highlight it as the one of the funds they expect to perform strongly if the European economy turns around.
Burnett is highly respected manager and has managed to keep his FE Alpha Manager status every year since the rating system started in 2009.
His long-term numbers are strong, as the graph below shows. Meanwhile, over the eight years of the last market cycle the fund’s annualised volatility and maximum drawdown have been lower than both the sector and the benchmark.
Performance of fund vs sector and index over manager tenure
Source: FE Analytics
Burnett currently has one-third of the fund in Italian equities, with 15.9 per cent in France and 10.6 per cent in Spain. Its largest holdings are France Telecom, Intesa Sanpaolo and Enel.
Neptune European Opportunities has a 0.82 per cent clean OCF.
Schroder European Alpha Plus
James Sym’s Schroder European Alpha Plus is in third place, with a 6.19 per cent gain since QE’s announcement. The fund is currently in the fourth quartile over one, three and years and has underperformed since Sym took over from Leon Howard-Spink in June last year.
Performance of fund vs sector and index over manager tenure
Source: FE Analytics
Sym typically keeps the fund at between 35 to 60 holdings. Schroder European Alpha Plus’s top five holdings are Renault, Pandora, Spanish multinational Abengoa, French automotive supplier Valeo and Dutch insurer Delta Lloyd.
Like Burnett, the manager has positioned his fund to benefit from a recovery in the European economy, which explains its underperformance over the past few years. Its largest overweights are to financials and industrials.
The FE Research team said: “Since Sym has taken over, the fund performed in line with peers and benchmark until the rebound led by defensive stocks in October, which was not fully captured, causing the fund to underperform.”
Schroder European Alpha Plus has a clean OCF of 0.92 per cent.
Schroder European Alpha Income
Another fund managed by James Sym, Schroder European Alpha Income has returned 5.43 per cent since 22 January.
Since launch in May 2012, the fund’s 74.70 per cent return has outpaced the gains of both its sector and benchmark, albeit with a higher annualised volatility of 13.84 per cent and a much greater maximum drawdown, at 10.11 per cent.
Performance of fund vs sector and index since launch
Source: FE Analytics
Nevertheless, the fund, which has a concentrated portfolio of 45 large and mid-sized European holdings, has received high praise from the likes of Adrian Lowcock, head of investing at Axa Wealth.
Speaking to Trustnet earlier this month, Lowcock explained: “Since Sym took over the fund in June 2013, it has outperformed its FTSE World Europe ex UK benchmark and its peer group. The fund’s largest sector allocation is to financials, which would be a natural beneficiary of QE.”
Like Schroder European Alpha Plus, this portfolio is tilted towards a recovering Europe with overweights to financials and industrials.
Schroder European Alpha Income has a 0.99 per cent clean OCF and yields 3.29 per cent.