The Euro at 25: resilience, growth, and investment opportunities

Happy birthday to the euro!

The euro, introduced in 1999, now serves as the daily currency for nearly 350 million people across 20 European Union (EU) countries. According to the EU, the euro has delivered numerous benefits, including price stability, enhanced economic resilience, and more efficient financial markets. It notes: “The euro is the currency of choice for almost 40% of global cross-border payments and for almost half the EU’s exports worldwide.”

A report by the European Parliament describes the euro as "remarkably resilient," citing factors like improved banking regulation and enhanced macroeconomic monitoring as key contributors to its stability.

It’s fair to say that the euro has made it easier for businesses in Europe – and across the world – to trade with each other over the last couple of decades. Such stability is an important factor for potential investors in Europe to consider as it’s such a vast region with so many household name companies.

The euro's stability has simplified trade for businesses in Europe and beyond over the past two decades, making the region increasingly attractive to investors. This is evident from the latest Investment Association data, which shows UK investors have £65.5 billion invested in the IA Europe excluding UK sector—£6.5 billion more than the same time last year*.

With no shortage of European funds available to investors, which ones are worth considering? Here we highlight five suggested portfolios.

Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and tax rules can change. Chelsea does not offer advice and so if you are unsure of anything please contact an expert adviser.

WS Lightman European

This is a genuine European value fund – which seems to be something of a rarity these days – and is all about taking a contrarian approach. It’s run by an experienced manager in Rob Burnett who uses a process built around years of academic research.

However, it’s fair to say that returns may be volatile. We believe this is the type of fund that will either be at the top or bottom of the performance tables due to its heavy value bias. The fund usually runs with a concentrated portfolio of around 40-50 holdings. These include giants such as Roche, Unilever, Orange and Danone**.

BlackRock Continental European Income

Undervalued companies are the main focus of attention for the managers of this fund. Andreas Zoellinger has run the portfolio since its launch back in 2011, while Brian Hall joined as co-manager a decade later. They will look for stocks that offer reliable, sustainable dividends, along with the potential for dividend growth and protection against inflation.

The fund, which has a flexible mandate when it comes to company size and country exposure, is heavily invested in industrial stocks. France has the largest geographic exposure, followed by Sweden and Denmark, while pharmaceutical giant Novo Nordisk has the biggest stock position of 5.6%**.

Fidelity European

We see this as a core European equity fund that takes a disciplined and cautious approach when it comes to portfolio management. Sam Morse, its lead manager, has three decades of experience in the field and focuses on the fund’s key strength of bottom-up stock picking.

Although this isn’t an income fund, the focus is on reliable, successful companies that can sustainably grow their dividends over time. Key qualities include having positive fundamentals, an ability to generate cash, a strong balance sheet, and stocks that can be described as being quality at a reasonable price. The portfolio is packed full of industry giants, including Novo Nordisk, ASML Holding, Nestle and LVMH**.

Janus Henderson European Focus

This fund’s managers – John Bennett and Tom O’Hara – rely on a combination of sector and stock analysis when it comes to running this fund. The end result of having a portfolio with the flexibility to invest across all industries is a concentrated portfolio of 30 to 40 best ideas.

We like that it can focus on the areas where most value can be added and is able to invest early enough in a stock to maximise the potential investment opportunity. Currently, just under half of the fund is in companies with market capitalisations of more than £50 billion**. The largest holdings feature Novo Nordisk, ASML, Novartis and Deutsche Telekom**.

Jupiter European

The final name in our list is a concentrated portfolio of between 35 and 45 stocks that’s managed by the experienced duo of Mark Nichols and Mark Heslop. The aim of the fund is to provide a return that’s higher than the FTSE World Europe ex-UK Index over periods of at least five years.

Favoured companies will have excellent management teams at the helm and strong business models that are exposed to long-term growth drivers. Key characteristics include decent barriers to entry, strong branding and efficiencies of scale, as well as an industry structure where no single customer can influence pricing.

*Source: Investment Association, full figures at June 2024 and June 2023
**Source: fund factsheet, 31 July 2024

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.