TM CRUX European Special Situations, Jupiter European and T. Rowe Price Continental European Equity are the most consistent IA Europe ex UK funds of the past decade, beating the most common benchmark in the sector, the MSCI Europe ex UK index, in nine of the past 10 calendar years.
Vanguard FTSE Developed Europe ex-UK Equity Index also managed the feat. However, this is a tracker fund which is benchmarked against a different index.
Of the 81 funds in the sector with a track record long enough to be included in the study, another four managed to beat the MSCI Europe ex UK index in eight of the past 10 calendar years.
FE fundinfo Alpha Manager Richard Pease has headed up TM CRUX European Special Situations since launch in 2009. Pease left to found CRUX Asset Management in 2014 and has managed the fund alongside co-manager James Milne since launch.
The fund is focused on identifying and investing in good quality businesses that are cash generative, possess an edge that their competitors find difficult to assail and run by management teams with proven track records. It primarily invests in medium and smaller sized companies although it can also hold large-cap stocks.
The team at Square Mile Investment Consulting & Research said that while this sounds like a simple strategy, “very few managers have the experience and ability to apply the process with sufficient rigour to ensure success”.
“They are patient investors and firmly believe that ultimately the market will reward those companies that produce consistent and recurring revenue streams due to the certainty this can bring to earnings and because these firms tend to be more resilient than others in challenging times,” the team added.
Data from FE Analytics shows TM CRUX European Special Situations made 189.21 per cent over the period in question compared with gains of 115.00 and 101.44 per cent from its sector and the MSCI Europe ex UK index.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The £1.6bn fund has ongoing charges of 0.86 per cent.
Next up is T. Rowe Price Continental European Equity, headed up by manager Dean Tenerelli, who runs a high-conviction, style-agnostic portfolio of about 40 to 70 mid to large European stocks.
Tenerelli aims to generate consistent outperformance with less risk than his peers by investing in higher-quality businesses with the potential to generate sustainable earnings across the market cycle.
Despite the fund’s strong performance over the past decade, the manager is seeking to temper expectations.
In his most recent note to investors, he said: “Valuations are now at or near their historical averages, and our valuation-based approach is challenged to find high-quality companies that can advance meaningfully from current levels.
“Nevertheless, we welcome any market volatility and dispersion of returns because it creates relative value opportunities that we can exploit. We remain positive about the performance potential of our holdings and their longer-term prospects.”
T. Rowe Price Continental European Equity made 156.21 per cent over the decade in question. It is just under €150m in size and has ongoing charges of 0.82 per cent.
The vast majority of Jupiter European’s gains came under previous manager Alex Darwall, who left the firm last year to set up Devon Equity Management.
He was replaced by Mark Nichols, formerly of the Threadneedle European Select fund, and Mark Heslop, in October 2019.
Investors can still access Darwall’s management skills via the European Opportunities Trust, which he was appointed to manage by the trust’s board.
Jupiter European made 261.51 per cent over the period in question. The £5bn fund has ongoing charges of 1.02 per cent.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
While Man GLG Continental European Growth only beat the MSCI Europe ex UK index in seven of the past 10 calendar years, it outperformed its sector in every one of these 12-month periods.
Manager Rory Powe has built his portfolio with two tiers: the first, which accounts for at least 50 per cent of the portfolio, consists of established leaders; and the second, which accounts for a maximum of one-third of the portfolio, consists of emerging winners.
The former tend to have visibility in revenues with an obvious expansion path, while the latter are more likely to be a vanguard in a new or existing industry. Stocks in both categories must have established competitive advantages.
The FE Invest team said that the high-conviction nature of this portfolio means it represents a “punchy way” to invest in Europe.
“Powe is a dedicated investment manager who learns from any mistakes and although the starting point of a qualitative screen is unusual, it shows the manager’s dedication to the bottom-up process,” FE Invest analysts said.
“The fund would make a good investment if an investor believes that more globally orientated, fast growing but expensive European companies will continue to outperform.”
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The £1.5bn fund has made 254.51 per cent over the past decade and has ongoing charges of 0.9 per cent.