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European equities are looking attractive at the moment, so take a look at these four products
Thursday 22 Jun 2017 Author: David Stevenson

It’s no wonder European equities are in demand. Other parts of the world have major issues to resolve. The US is beset by political turmoil in the shape of its maverick president Donald Trump, the UK is facing the fall-out from the general election and the start of Brexit negotiations and Chinese growth fears remain prominent.

With valuations for Continental Europe-focused funds looking undemanding, we highlight four collectives that could capitalise from this pick-up in European markets.

Jake Moeller, head of UK and Ireland research at fund rating company Lipper, describes our selection: ‘These are four very good funds each characterised by skilful managers, conviction positions and a robust pedigree,’ he says.

FUNDS1

This fund has a long-term, flexible approach to investing. Its preference is for quality companies with good prospects that are attractively priced. The managers, Mark Page and Laurent Millet, have an investment universe of around 700 stocks for the fund, determined by liquidity requirements or in other words the ability of the managers to enter and exit a position.

Investment research outfit Square Mile describes this fund
as ‘pragmatically run’ with an aim to generate consistent ‘though not aggressive’ outperformance of the market. It adds that ‘though the managers would perhaps ideally like to always purchase high quality growth businesses, they appreciate that there will be times when these look overvalued’.

Samuel Meakin, analyst at Morningstar, says Artemis’ fund benefits from experienced management and consistency of process. The managers have worked together for nearly 10 years and Meakin says they have formed a strong partnership during that time.

FUNDS2

This fund looks at small and mid cap European stocks, investing in companies with less than €5bn in market cap. As this market cap limit would result in over 5,000 stocks across Europe, fund manager Nick Williams uses various screens to reduce this number to a more manageable level.

Its aim is to achieve long term capital growth and generate a return of 3% a year above the index it tracks (Euromoney Smaller European Companies ex UK).

Square Mile says the outcome is achievable in the long term; over shorter periods of time the fund can experience sharp fluctuation in performance.

Moeller says Williams has ‘strong contrarian convictions that has consistently added value’.

FUNDS3

This fund can take significant positions away from the benchmark it tracks, the FTSE World Europe ex UK Index, hoping to outperform in a variety of market conditions. This also allows for greater exposure to smaller sized companies. The fund favours growth and value stocks based on the market outlook.

The portfolio will typically consist of 35 to 65 holdings chosen across the entire market cap spectrum.

The fund benefits from a closely knit investment team put in place by veteran investor Nigel Bolton who joined BlackRock from Scottish Widows Investment Partnership, as did fund manager Alistair Hibert. The team has a disciplined approach to investing combined with looking at the global outlook as well as looking in detail at each company.

Square Mile thinks highly of manager Hibert, saying he is an ‘experienced and skilled investor’.

FUNDS4

This fund focuses on the small and mid cap part of the European equities market, although it may include some large cap stocks. The fund invests in companies with low capital requirements, meaning that only a low level of funding is required to produce a good product or service.

These businesses should be able to generate a high return on their capital expenditure and may have excess cash on their balance sheets to return to shareholders via extra dividends.

FUNDS FAVOURITE

Lipper’s Moeller says: ‘Richard Pease [fund manager] is a long-term investor in stocks. Low portfolio turnover and durable investment stories are thoroughly considered.’

Pease and his co-manager James Milner look for shares that are conservatively valued versus their peers and the market. Square Mile says this philosophy means there could be periods when the strategy may struggle, such as if markets are chasing a certain theme. However, it adds, ‘over a cycle, we believe the fund should continue to be a standout performer’.

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