The market has done very well over the past year already, with the DJ Eurostoxx index up 21.92 per cent in 2013.
According to FE’s ranking systems, those looking to take advantage are spoilt for choice when it comes to top-rated funds.
There are six portfolios with five FE crowns, an FE Alpha Manager and that are recommended by FE’s AFI panel of leading IFAs.
One – Standard Life European Equity Income – will be considered with the other ex-UK equity income funds in a later article.
Group ratings refer to those considered outstanding or highly commended in a particular sector.
The ratings page on FE Trustnet helps to identify the top-rated funds. Click here to do your own customised search.
Henderson European Selected Opportunities
• FE Crowns: 5
• FE Alpha Manager: Yes
• FE AFI: Balanced and Aggressive
• FE Group Rating: Highly Commended
John Bennet’s £1.47bn Henderson European Selected Opportunities has been hiding from the eurozone crisis in Switzerland and Germany, with 28.8 per cent and 22.1 per cent in those countries respectively.
The manager has taken up a strong position in healthcare stocks in particular, with drugmakers Novartis, Roche, Bayer and Sanofi his top four holdings. Novo-Nordisk is also in the top 10.
This defensiveness has paid off in recent years, with the fund making 39.46 per cent over the past three as the FTSE Europe ex UK benchmark has made 26.91 per cent.
Performance of fund versus sector and index over 3yrs
Source: FE Analytics
The fund is a steady performer, with volatility around the sector average and a low maximum gain – the biggest movement upwards in a single period.
It has proven to be particularly good in down markets in the past, and has returned only marginally more than its benchmark in the bull market of 2013.
The fund is available with a minimum initial investment of £1,000 and has ongoing charges of 1.76 per cent.
Jupiter European
• FE Crowns: 5
• FE Alpha Manager: Yes
• FE AFI: Balanced and Aggressive
• FE Group Rating: Outstanding
Alexander Darwall’s £2.24bn Jupiter European is the biggest of the funds on this list, and the manager’s reputation is also probably the biggest.
It is less benchmark aware than the vast majority of funds on the list, with an r-squared and a beta at the bottom end of the fourth quartile.
The r-squared measures the strength of the correlation between the fund and its benchmark, giving a figure to how much the fund’s movements depend on its benchmark, while the beta reflects a fund’s sensitivity to movements in the index.
It is another fund to have lagged slightly in 2013, at least in comparison to previous years – it was a top-quartile performer in each year between 2008 and 2012.
That so many top-performing funds are around or behind the benchmark this year could be a concern for investors looking to the region at this time.
Darwall’s fund would definitely be a decent portfolio to be in should the market come off, judging by past performance. It is top quartile in terms of volatility and downside risk.
The fund has a minimum initial investment of £500 and has ongoing charges of 1.79 per cent.
Threadneedle European Select
• FE Crowns: 5
• FE Alpha Manager: Yes
• FE AFI: Balanced
• FE Group Rating: Outstanding
The £2.13bn Threadneedle European Select fund, which is run by David Dudding, has beaten Darwall’s portfolio over three years with returns of 50.85 per cent to his 43.29 per cent, according to FE Analytics data.
Performance of funds versus sector and index over 3yrs
Source: FE Analytics
The Jupiter fund has done better over five and 10 year periods, however.
The fund’s biggest sector bet is in consumer products, in which it holds 25.2 per cent. Brewer Annheuser-Busch and cosmetics company L’Oreal are top 10 holdings.
In 2013 it has returned 19.13 per cent compared to the 19,55 per cent made by the FTSE Europe ex UK benchmark.
Jupiter and Threadneedle are the only two groups to have won the outstanding group awards in other developed equity markets – those not including the UK.
It has a minimum initial investment of £2,000 and has ongoing charges of 1.71 per cent.
Henderson European Special Situations
• FE Crowns: 5
• FE Alpha Manager: Yes
• FE AFI: Aggressive, Balanced
• FE Group Rating: Highly Commended
This £883m fund has a shorter track history than those funds already considered, being launched in 2009.
It is a more aggressive portfolio too, and has done the best this year out of those on this list, returning 22.1 per cent year-to-date. The fund also did very well in 2010 and 2012, two up-years for the market. It is the only fund on the list to be top-quartile over one year.
Managed by Richard Pease, it has 29.7 per cent in industrials, with fragrance manufacturer Symrise and lift-maker Kone the top two holdings.
The fund’s very different holdings make it complementary to the more defensive funds on the list.
It has a minimum initial investment of £1,000 and has ongoing charges of 1.76 per cent.
BlackRock European Dynamic
• FE Crowns: 5
• FE Alpha Manager: Yes
• FE AFI: Aggressive, Balanced, Cautious
• FE Group Rating: Highly Commended
Alister Hibbert took over this fund in March 2008, hardly the best time. It did relatively well that year, providing top-quartile returns, and did the same in 2010 and 2012.
The blot on the copybook is 2011, in which the fund produced bottom –quartile returns, losing 17.83 per cent.
It is the most volatile fund on this list, with the highest maximum drawdown – the most you could have lost if you had bought and sold at the worst times.
However, the fund is top-quartile over three years, and has produced the best returns over five thanks to its outstanding 2008.
Performance of fund versus sector and index over 5yrs
Source: FE Analytics
This may be why it is one of only two funds on the list chosen on the AFI Cautious shortlist of preferred funds.
The fund has a minimum initial investment of £500 and has ongoing charges of 1.67 per cent.
