Three funds for Europe Day 2024
Europe Day is being celebrated next week on Thursday, 9 May. This annual event has been held for decades to celebrate peace and unity across the continent.
First, a brief history lesson. Europe Day marks the anniversary of French foreign minister Robert Schuman’s 1950 declaration of a new form of political cooperation in Europe. He proposed the creation of a European Coal and Steel Community, with members benefitting from pooled production and aligned economic interests. The plan, which it was hoped would make war between nations virtually unthinkable, is widely regarded as being the beginning of the European Union (EU).
While the UK is no longer part of the EU, following a referendum almost eight years ago, the region is still hugely important to British investors. Firstly, it’s home to around 6,000 listed companies – and this includes a string of household name multinationals with huge market capitalisations. This includes everything from luxury goods firms and cosmetics giants, such as LVMH and L’Oréal, to pharmaceutical firms and car manufacturers. UK investors currently have £62.4bn in the IA Europe Excluding UK sector, with a further £1.9bn in the IA European Smaller Companies sector*.
To mark Europe Day, we take a closer look at opportunities on the continent.
The good news is that investors who are enthusiastic about Europe are certainly spoiled for choice when it comes to fund options. There are plenty of strong portfolios run by experienced fund managers with impressive track records over many years. Here we spotlight three European funds from the Chelsea Selection that could be worth a look.
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, if you are unsure of anything please contact an expert adviser.
BlackRock Continental European Income
Providing an above-average income is the aim of this fund, which has been managed since launch by Andreas Zoellinger. It looks to achieve this goal by searching for undervalued European companies that offer reliable, sustainable dividends and the potential for dividend growth. We believe the combination of the manager’s experience and BlackRock’s strong European team have produced an impressive fund that pays an above-average yield, with below-average volatility. The fund also has a diversified geographic breakdown. France accounts for 31% of assets, followed by Sweden and Switzerland with almost 15% and 9% respectively**.
FTF Martin Currie European Unconstrained
Italian supercar manufacturer Ferrari and ASML, the Dutch chipmaker, are among the largest holdings in this fund**, which aims to grow in value over five years or more. Its lead manager, Zehrid Osmani, runs it as a focused, high-conviction portfolio that doesn’t have constraints on regional or country allocations. Instead, he takes a long-term approach in the belief that it’s more important to consider the five to 10 year time horizon and ignore short-term noise. Zehrid has a lot of experience of investing in European equities in this way and had considerable success at BlackRock with a similar fund.
IFSL Marlborough European Special Situations
Our final fund focuses on smaller companies. Although the fund can invest in companies of all sizes, manager David Walton will focus on the continent’s minnows scouring the market for under-the-radar opportunities. The fund currently has over half of the portfolio in small and micro-cap names**. We consider the team an expert in small-cap investing, having built a stellar track record in this space, and the manager of this fund has been very successful at mitigating the risks that are typically associated with smaller companies.
*Source: Investment Association, February 2024
**Source: fund factsheet, March 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.