A cautious approach to the European value story
Investors looking to benefit from the eventual European recovery might want to consider Threadneedle European Select.
Industry experts agree that sooner or later there will be the buying opportunity of a generation in Europe, and the braver investors are already looking to get back into the continent.
Valuations of companies are extremely low due to fears over the eurozone debt crisis, and all investors know that it is best to buy when everyone is afraid – the key, of course, is timing.
Those who are preparing to put their toe in the market might find Threadneedle European Select
an attractive option.
The portfolio has five FE crowns and is run by an FE Alpha Manager
– David Dudding
– and has provided top quartile returns in the IMA Europe ex UK
sector over one, three, five and ten year periods.
Clearly volatility is a huge concern for anyone thinking of investing in Europe, and this fund has the second-lowest volatility in the sector over the past five years.
The fund has navigated the continent’s recent turbulent period with a volatility score of 19.46 per cent, lower than the sector average of 22.96 per cent.
Last month Bestinvest upgraded their rating of the fund, and research analyst Mark Lane said:“Dudding’s almost sole focus on companies rather than the market means that he is susceptible to short term bursts of market euphoria.”
“During such periods we do not expect him to produce the highest returns in the peer group. Over more sensible time periods, however, we believe that the fund will produce significant out performance to investors. We believe that this is therefore a core European equity fund.”
Performance of fund vs sector and benchmark
Source: FE Analytics
Dudding took over the portfolio in July 2008 while global markets were in the middle of a sustained fall.
The fund tracked its FTSE World ex UK benchmark quite closely until the second half of 2010, when it started to pull away.
It’s when it’s considered in relation to its sector that the fund really shows its worth; since Dudding took over it has gained 29.52 per cent while the sector has lost 7.04 per cent.
Although the fund has lost 7.53 per cent over the past year, this is the second-best result in the sector.
Over ten years Threadneedle European Select has gained 98.54 per cent, putting it in the sector’s top quartile.
Perhaps unsurprisingly the fund is overweight stronger European economies such as Germany, Sweden and Finland; it is underweight France and Switzerland.
It is 7.6 per cent underweight financials, and 4.9 per cent underweight both utilities and telecommunications.
Nestle, a company with strong extra-Europe exposure, is the top holding in the portfolio.
The minimum investment is £2,000 and the total expense ratio (TER) is 1.69 per cent.