The £894.4m Invesco Perpetual European Equity fund, the £27.7m European Opportunities fund and the £69.9m European Equity Income fund make up three of the five funds with the highest exposure to Spain.
Five funds with the highest exposure to Spain
| Fund | Returns (%) |
| Smith & Williamson European Growth | 12.7 |
| Invesco Perpetual European Equity | 11.53 |
| Invesco Perpetual European Opportunities | 11.03 |
| Artemis European Opportunities | 9.8 |
| Invesco Perpetual European Equity Income | 9.74 |
Source: FE Analytics
The Invesco funds have benefited from holding Spanish stocks such as Repsol, Banco Bilbao and multinational construction and civil engineering company Obrascon Huarte Lain, outperforming the sector over one- and three-month periods.
Jeffrey Taylor’s European Equity fund has delivered nearly double the returns of the Europe ex UK sector over the past month. The fund upped its weighting to Spain in June after having marginally reduced it in May.
The Invesco Perpetual European Equity Income fund, managed by Stephanie Butcher, has also shot ahead of the market over one and three months. The fund’s third-largest holding is in Spanish oil and gas company Repsol, which faced heavy losses following the nationalisation of its Argentine division earlier this year.
Performance of funds vs sector over 3 months
Source: FE Analytics
Meanwhile Invesco Perpetual’s European Opportunities portfolio, managed by Adrian Bignell, has maintained a steady correlation to the sector over one month, but slightly lagged over three, despite its high exposure to Spain.
In the longer term, however, the five crown-rated fund has significantly outperformed, delivering returns of 4.16 per cent compared with losses of 7.4 per cent from its sector.
However, the five crown-rated European Opportunities fund has drastically outperformed the sector over three years, returning 36.1 per cent during this time.
Smith & Williamson's £17.9m European Growth fund, managed by Mark Pignatelli, has the highest exposure to Spain of all equity funds, with 12.7 per cent.
It has surged ahead of the IMA Europe ex UK sector in the previous month’s market rally, returning 7.4 per cent compared with 3.7 per cent from the sector average, according to FE data.
Spanish equities are the third highest weighting in the fund, behind German and Swiss stocks, with Santander its largest Spanish holding at 3.9 per cent.
Pignatelli began upping the fund’s exposure to Spain in May, after reducing it amid the economic volatility in April.
Bill O’Neill, chief investment officer for Europe, Middle East and Africa (EMEA) at Merrill Lynch Wealth Management, says that if Spain goes ahead with a request for aid from the European Central Bank’s (ECB) bond-buying programme, it will mark a "leg higher" for global equity markets, particularly if it coincides with greater clarity on the US election outcome and year-end fiscal cliff.
Meanwhile, Spanish and Italian companies rushed this week to issue debt as investors ramped up their risk appetite on the back of ECB president Mario Draghi’s proposed bond-buying programme.
Corporates in Europe issued €7.8bn worth of debt yesterday, with Spanish financials Banesto, BBVA and Intesa Sanpaolo issuing roughly €3bn in three- and four-year bonds, according to the Financial Times.
Spain’s benchmark Ibex 35 equity index had lost 22 per cent of its value in June, the same time Moody’s Investors Service downgraded the sovereign’s credit rating to one notch above junk status.
However, the index has gained some ground in recent weeks, losing 9.06 per cent of its value year-to-date, and stands poised to benefit from the ECB’s bond-buying programme.