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How these European funds have got on three years after launching

30 October 2018

FE Trustnet looks at funds launched during the second half of 2015 and compare their three-year track records.

By Jonathan Jones,

Senior reporter, FE Trustnet

Investors would have been well rewarded for placing their faith in newly-launched European funds, according to the latest study by FE Trustnet.

Of the six funds in the various investment association (IA) sectors, none have made a bottom-quartile return and only one is below average.

Three years is typically a good barometer of performance for advisers and private investors to see whether a fund manager can deliver on the promises they have made, be it on process, returns, philosophy or style.

When looking at the global and UK sectors previously, funds have oscillated between the top or bottom of their respective sectors.

However, in Europe the trend is quite different. Indeed, returns have been much more favourable, with more than half making top-quartile returns in their respective sectors.

We start with the IA Europe ex UK sector, which saw four of the six funds in this study launched between June and December 2015.

The top performer since inception has been the £395m LF Miton European Opportunities fund, managed by Carlos Moreno and Thomas Brown.

The portfolio, which is made up of 51 stocks, has returned 62.11 per cent since December 2015, the best in the sector of 106 funds.

It has done so with second-quartile volatility of 10.25 per cent, giving the fund has a sector-topping Sharpe ratio – a measure of risk-adjusted returns – of 1.93.

Performance of fund vs sector since launch

 

Source: FE Analytics

Currently, the portfolio is most highly-weighted to the Nordic countries (Denmark, Finland, Norway and Sweden), with heavyweights Germany, Switzerland, Italy and France all double-digit weightings within the portfolio.

LF Miton European Opportunities has a clean ongoing charges figure (OCF) of 0.95 per cent.

The fund is one of four to deliver top-quartile returns since inception, with Comeragh European Growth next in absolute terms.


The €69m fund, which is headed up by Mark PignatelliAndrew Carver and Michael Pascall, has made a 39.91 per cent total return to investors since its launch in September 2015.

This comes despite the fund’s strong value bias, which has been a headwind to the portfolio as the market has largely been driven by high growth, high duration stocks.

While the managers had expected this trend to reverse this year, in the latest factsheet they highlighted the difficult environment for its approach during 2018.

Currently, the portfolio is most overweight oil stocks, as cash-generative companies focus on cleaning balance sheets rather than capital expenditure.

Comragh European Growth had an OCF of 1.1 per cent as of 5 February 2018.

Relative to its peers, Polar Capital European (EX UK) Income has been the best performer since inception, having made investors 38.03 per cent – the 14th-best in the sector.

Performance of fund vs sector and benchmark since launch

 

Source: FE Analytics

Run by Nick Davis, the £189m fund has around two-thirds of the portfolio invested in large-caps and has large positions in industrials, financials and telecom businesses.

The 33 holding portfolio has double-digit positions in France, Germany, Spain and Switzerland, with Total SA, Sanofi, Novartis, Roche and Deutsche Telekom its top five holdings. It has an OCF of 0.87 per cent.

The only other fund launched in the back half of 2015 from the IA Europe ex UK sector was FE Alpha Manager Richard Pease and James Milne’s £170m FP CRUX European.

The fund started in the November and has since returned 25.62 per cent to investors, a third-quartile performance among peers.

FP CRUX European focuses on good quality, cash generative, well run businesses that possess an edge that their competitors find difficult to replicate. The theory is that the market will ultimately reward companies with recurring revenues, due to their certainty of earnings.


As such, the portfolio is mainly invested in capital goods and telecoms businesses, although materials and healthcare stocks are the third and fourth largest weightings respectively.

It holds between 45 and 55 stocks with around half of the portfolio invested in large-cap names and the other half in the mid-cap space, at present. It has a yield of 2.06 per cent and an OCF of 0.91 per cent.

Turning to those focused on European smaller companies, Mirabaud Equities Europe Ex-UK Small and Mid fund launched in November 2015.

The fund, managed by FE Alpha Manager Ken Nicholson and deputy Trevor Fitzgerald, has been a second-quartile performer in the sector over the period under review, returning 38.8 per cent to investors.

Currently the fund has large overweights to Germany, Spain, the Netherlands and France, while it has nothing in Ireland, Norway, Finland or Portugal. It has an OCF of 1.08 per cent.

Table of ‘new’ funds performance since launch

 

Source: FE Analytics

The final fund is the Pimco RAE Europe which resides in the IA Europe Including UK sector, which has been a second-quartile performer, returning 25 per cent since inception in June 2015.

The fund weights stocks based on non-price measures of company size – e.g. cash flows, dividends, etc – and then applies additional enhancements designed to improve risk-adjusted returns.

It aims to beat the MSCI Europe benchmark, which it follows but tilts away from where the managers believe there are market inefficiencies.

Currently, of its top-five sectors by weighting, the portfolio is most overweight financials and utilities relative to the index, while it is underweight industrials, healthcare and consumer discretionary stocks.

Managed by Christopher Brightman and Robert Arnott, the fund has an OCF of 0.72 per cent.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.