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The European funds that looked after investors best in 2011 and over the time since

06 December 2016

With fresh uncertainty on the horizon for Europe, FE Trustnet finds out which funds held up the best when the during the eurozone debt crisis of 2011.

By Gary Jackson,

Editor, FE Trustnet

Threadneedle European Select, Baillie Gifford European and Standard Life Investments European Equity Income are some of the European equity funds that made the smallest losses during the bear market year of 2011 and have beaten the market since, which may offer food for thought to investors concerned by the Italian referendum.

Italy has been left facing economic and political uncertainty after wide-reaching constitutional reform was voted down by the electorate, triggering the resignation of prime minister Matteo Renzi. Around 60 per cent of the votes in the weekend’s referendum were against the reforms, which aimed to redistribute power between Italy’s two houses and speed up the decision-making process.

Although markets took the news in their stride, with the FTSE 100 making a 0.24 per cent gain over the day and the Euro Stoxx 50 rising 1.29 per cent, investors have warned that the result could lead to a dip in sentiment towards Italy in particular and Europe in general.

Performance of sector and index in 2011

 

Source: FE Analytics

With this in mind, FE Trustnet looked back to the last time the continent faced a significant reversal in sentiment (even though it is too soon to tell if a similar turn of events will occur from here) to see which IA Europe ex UK funds held up best in the eurozone crisis year of 2011.

As the chart above shows, the average European equity fund underperformed the MSCI Europe ex UK index during that year after losing 15.57 per cent in sterling terms. The bulk of losses came in the second half of the year when fears of a eurozone break-up intensified, leading to a maximum drawdown of more than 27 per cent of both the sector and index.

While no funds in the sector managed to eke out a positive return over the year, some did make much lower losses than the index. In this article, we looked at the funds that were first quartile for total returns, annualised volatile and maximum drawdown in 2011 and have gone on to beat the index since.


As the table below shows, there are six funds from the IA Europe ex UK sector that were in the top quartile on all three of the metrics examined. All of these funds went on to post better total returns than the MSCI Europe ex UK in the years after the eurozone debt crisis.

 

Source: FE Analytics

Threadneedle European Select, which is headed up by FE Alpha Manager David Dudding, tops the table when it comes to total return in 2011 thanks to its loss of just 5.41 per cent over the year. The £3.3bn fund also came third for maximum drawdown and 16th place for annualised volatility.

It’s also in the first quartile of the sector between 1 January 2011 and 5 December 2016 on the back of a 70.52 per cent return. This compares to a rise of just 40.92 per cent in the MSCI Europe ex UK and a 46.99 per cent average return from the sector.

Dudding prefers quality businesses and especially those that have a competitive advantage in sectors with high barriers to entry. Top holdings include Unilever, Novartis and L'Oreal, while it has overweights to consumer goods and healthcare but is underweight financials.

Performance of funds vs sector and index since 1 Jan 2011

 

Source: FE Analytics

The £185m Baillie Gifford European fund, managed by Thomas Coutts, Stephen Paice, Moritz Sitte and Tom Walsh, is the only other fund in the first to be first quartile for total returns, annualised volatility and maximum drawdown in 2011 as well as returns for the full period since 1 January 2011.


This is another fund with a quality-growth bias, although the managers will by unpopular stocks if they believe they have spotted a contrarian opportunity. Its top three holdings at the moment are Svenska Handelsbanken, Ryanair and Atlas Copco; it has almost one-quarter of its portfolio in Sweden with 18 per cent in Switzerland.

Like all Baillie Gifford funds, it is managed with a long-term view. Supporting this, Baillie Gifford European is top decile over 10 years with a 133.02 per cent total return; in comparison, the MSCI Europe ex UK index is up 58.56 per cent while its average peer has made 67.27 per cent.

While the Threadneedle and Baillie Gifford funds are the only two on the list to post first quartile total returns between 1 January 2011 and 5 December 2016, three of the others are in the second quartile and have beaten the index over the same period.

Performance of funds vs sector and index since 1 Jan 2011

 

Source: FE Analytics

As the chart above shows, Will James’ £948.6m Standard Life Investments European Equity Income fund has made 57.96 per cent, Richard Scrope’s £12.2m CFIC Oriel European fund is up 53 per cent and Olly Russ’ £96m Liontrust European Enhanced Income fund has made 50 per cent.

The other fund on the list of six – Allianz European Equity Income, managed by Joerg de Vries Hippen – has made third quartile returns since 1 January 2011 after returning 45.55 per cent. While this is below the sector average, it is still around 5 percentage points more than the MSCI Europe ex UK index.

Although it made the sector’s third best return in 2011, the 60 per cent made between 1 January 2012 and 4 December 2016 was below the rise made in the index and put it in the sector’s fourth quartile, which has dragged it into the third quartile for the overall period looked at in this article.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.