The best open-ended Europe funds have generated very strong positive returns over the long term, and have even offered returns in excess of 20 per cent over the past year. These include , the best performer over three and five years, and Jupiter European.
BlackRock Continental European, managed by Vincent Devlin, also does well over three and five years, while a more recent entrant to the market, Liontrust European Growth, has been among the top performers among Europe ex-UK funds since launch. Mr Yearsley also suggests Schroder European Alpha Plus and Cazenove European.
There is also the Baring German Growth, although single-country funds are riskier due to their concentration on one area.
Europe open-ended funds
| Fund | 1-yr total return (%) | 3-yr total return (%) | TER (%) |
|---|---|---|---|
| BlackRock Continental European A Inc | 8.39 | 21.5 | 1.68 |
| BlackRock European Dynamic A Inc | 18.6 | 41.47 | 1.67 |
| Cazenove European B | -5.06 | -1.74 | 1.59 |
| Jupiter European | 21.12 | 35.88 | 1.81 |
| Liontrust European Growth Inc | 16.69 | 17.12 | 1.64 |
| Schroder European Alpha Plus Acc | 5.32 | 4.74 | 1.67 |
Source: Morningstar as at 11 January 2010.
Investment trusts
Investor antipathy to Europe caused discounts to net asset value (NAV) on European investment trusts to widen over 2010, so this could be a buying opportunity. Jupiter European Opportunities investment trust is run by the same manager as the Jupiter European Fund, and while its discount is actually tighter than usual due to its stand-out NAV performance, it still trades at a discount of more than 7 per cent.
Another strong performer is BlackRock Greater Europe, also run by Vincent Devlin, although this has the tightest discount in the sector at less than 3 per cent. While Henderson Eurotrust is not such a strong performer as the two former trusts, it has made positive returns over one, three and five years, which are well ahead of the FTSE Europe ex-UK index, and is on a discount of nearly 12 per cent.
European investment trusts
| Investment trust | 1-yr NAV growth | 3-yr NAV growth | Disc to NAV (%) | TER (%) |
|---|---|---|---|---|
| BlackRock Greater Europe | 12.9% | 23.5% | 3.56 | 1.1 |
| Henderson Eurotrust | 10.6% | 27.0% | 13.72 | 0.97 |
| Jupiter European Opportunities | 33.4% | 51.2% | 6.84 | 1.17 |
Source: Investors Chronicle as at 11 January 2010
Passive options
An argument against passive exchange-traded funds (ETFs) that track European indices is that an active manager can seek to eliminate bad stocks or problem countries. "Now is a period when stock-pickers will stand out," says Mr Lowcock. "There are a lot of risks and uncertainties."
Europe's more troubled markets account for just over 20 per cent of the FTSE World Europe ex-UK and 15 per cent of the MSCI Europe ex-UK, so be careful that a Europe ETF does not over-expose you to these countries. The lower costs of ETFs will eat less into your returns than those on active funds. An option could be to hold a mixture of ETFs and active funds, to balance costs and the potential for outperformance.
iShares and DB x-trackers offer several Europe ETFs, with offerings also from Lyxor and Powershares.
