Five funds for a European bull-run

FE Trustnet takes a look at a selection of top-rated portfolios that could be set for massive gains if we are indeed over the worst of the eurozone crisis.

By Thomas McMahon, Reporter
Tuesday August 07, 2012

Confidence in the will of the eurozone’s leaders to do whatever is necessary to keep the currency union together has been growing in recent weeks, leading a number of commentators to suggest that it’s time to think about investing in the continent.

Premier’s David Hambidge told FE Trustnet last week that it is time to get into European income-paying stocks before the rush starts, while RWC’s Ajay Gambhir said yesterday that the continent’s markets were returning to normalcy, with valuations driving movements rather than macro concerns.

Here are five top-rated funds in the sector that may appeal to those expecting a significant rebound:

Jupiter European

FE Alpha Manager Alexander Darwall’s portfolio is the standout fund in the sector, and unlike the funds of many star managers it is still open to new investors.

The lack of confidence in the European markets means Jupiter European hasn’t seen the mass inflows that other managers of his stature inspire, forcing them to soft-close their funds.

Five-crown rated Jupiter European has gained 212.85 per cent over a decade – the second best performance in the sector. It’s also a top quartile performer over a one, three, five and ten year period, as well as being consistently below average in terms of volatility.

Performance of fund versus sector and benchmark over 10yrs

Source: FE Analytics

The fund is a strong performer in both rising and falling markets, so is likely to be of particularly interest to those who are still worried by macro headwinds.

It is available with a minimum investment of just £500 and has a total expense ratio (TER) of 1.79 per cent.

BlackRock European Dynamic

FE Alpha Manager Alister Hibbert’s fund is the only one to beat Darwall’s over ten years, returning 244.07 per cent to investors.

According to data from FE Analytics, the fund has added the most Alpha out of any in the sector over five years, meaning that the manager has added the most value to his benchmark.

Despite their similarly strong records, the managers have just three companies in common in their top ten holdings – Novo-Nordisk, Syngenta and Fresenius.

The fund has suffered slightly over the past year, losing 2.33 per cent; however, it has a better record than Darwall’s portfolio in up markets, outperforming it in 2005, 2006, 2009 and 2010. For this reason, it may be the preferred option for those who are especially bullish.

Another five-crown rated portfolio, it is also available with a minimum initial investment of £500, and has a TER of 1.67 per cent.

Allianz Continental European

This fund hasn’t performed quite so well over ten years, slipping into the second quartile for returns, although it is in the first quartile over three and five years, with returns of 32.37 and 13.17 per cent respectively.

Performance of fund versus sector and benchmark over 5yrs

Source: FE Analytics

It has seen management change hands a number of times over the years, and is now headed up by Matthias Born and Thorsten Winkelmann.

Unusually, the portfolio has a preference for French-domiciled companies compared to those in Germany. French stocks make up 29.5 per cent of its holdings rather than the 17 per cent in Germany.

With a minimum investment of £500, it has a TER is 1.76 per cent.

AXA Framlington European

Like Jupiter European and Blackrock European Dynamic, this fund is in the top quartile over every timeframe from ten years through to one month, and has five FE Crowns.

The manager, Mark Hargraves, has run the portfolio since December 2000, giving him lots of experience of the sector.

A minimum investment of £1,000 is required to gain access and the TER is 1.59 per cent.

Threadneedle European Select

The fund’s returns of 49.18 per cent make it the second-best performer over three years after Jupiter European.

FE Alpha Manager David Dudding has run the fund since 2008, and the portfolio has five FE Crowns.

Its five year annualised volatility of 19.47 per cent is the lowest out of all the funds considered here, and it also lost the least in 2008.

Threadneedle European Select has a minimum investment of £2,000, and a TER is 1.69 per cent.

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valiant Aug 08th, 2012 at 06:13 PM

Firstly excuse my spelling. My last comment on this item is as follows. Many investors seem to think that all the old rules apply to investing.Such things like if there is fear buy, if the news is bad buy and maybe historically a few people made money in these situations. Todays problems in my view are much worse because of the severe debt problems. These debt problems are not being tackled. The World Banks are printing money which is one of the reasons markets are holding up. When these policies are seen to have failed there will be a major problem. The issue though is not if they fail but when and there lies the key.

Ark Welder Aug 09th, 2012 at 12:42 AM

You may want to read up on the policy failures of the US authorities in the 1930s when they stopped their stimulus measures too early in the 1930s after the Great Depression, due to the orthodox

google FT headline: Lessons from the Fed’s Mistake of 1932

Ark Welder Aug 08th, 2012 at 07:25 PM

There is always fear. What is needed, is enough fear.

valiant Aug 08th, 2012 at 05:14 PM

In some respects Ark Welder your comments are correct with one basic floor. With the news out of Europe being so bad in the last 12 months you would have expected markets to have tanked. Quite the opposite they have gone up or at worst remained flat. As I pointed out Jupiter European Fund has returned 51% over 3 years. I think if you buy now you will make some gains but the risk is to great for me. If European markets drop by another 20% plus that may be a buying opportunity. Investing is about different views and of course you made turn out to be right. Good luck.

Ark Welder Aug 08th, 2012 at 05:54 PM

Three years ago the general situation was dire, so rises since then are a reflection that things have - so far - turned out better than were feared back then.

But no flaw in the thinking, because European markets are not all equal. Some have tanked, and some are very volatile, but other markets, e.g. Germany and Scandinavian countries, have done OK. So I would not expect all funds to have tanked on bad news because they can avoid the countries with the worst problems.

Hence, the last sentence of my previous comment. When I believe that the news is truly bad enough - probably to the extent that it affects even the good European markets - then I will be likely to increase my exposure.

valiant Aug 08th, 2012 at 12:54 PM

Fair enough. All I would say is that you have an article where the strong suggestion is of a bull market in Europe with massive potential gains. Yet the news out of Europe is truly grim and seriously bad this very morning. I don't know if you already do this but perhaps all articles should carry a note saying that this is not the view of Trustnet and should not be taken as advice to invest. If you do this now my apologies.

Ark Welder Aug 08th, 2012 at 04:58 PM

If the current news out of Europe is grim then that in itself could be a positive signal. The best times to invest are when bad news is being priced into stocks and markets are low. Markets tend to be forward-looking and tend to anticipate good times when current news is bad - and vice versa.

I'm wondering whether the current news is actually bad enough at the moment to justify upping my exposure further!

Roddi Aug 08th, 2012 at 02:39 PM

Pretty sure it says "leading a number of commentators to suggest that ..." and "that may appeal to those expecting"

You're being a bit unfair if you ask me.

valiant Aug 08th, 2012 at 09:35 AM

Pascal, A serious question to you. Are you saying that the vast majority of articles on here are being published with the interests of your readers as the top priority.

Pascal Dowling Aug 08th, 2012 at 12:07 PM

Yes, of course. If our readers interests weren't our top priority I doubt that our copy would be of much use to them - which would make it difficult to justify a journalistic element on the site at all.

Pascal

Andrew Alexander Aug 08th, 2012 at 12:17 PM

Yet you delete readers comments?

http://www.trustnet.com/News/Research.aspx?id=357765

PeterDee Aug 07th, 2012 at 03:01 PM

The performance of Jupiter European Opportunities investment trust (also managed by Alex Darwall) has absolutely smashed Jupiter's European Fund - but of course it doesn't pay commission to IFAs....

Ark Welder Aug 08th, 2012 at 05:04 PM

JEO also has a large exposure to the UK (around 35% now, but has been up in the mid forties), whereas the OEIC is around 5% only. So JEO won't give as much exposure to Europe as the OEIC, if that is the objective. Just something to be considered if the requirement is reduced exposure to the UK.