Jupiter's special European situation

Europe may sometimes look like an economic basket case, but it is important to distinguish between its economic outlook and the outlook for the best European companies. For those, the view is surprisingly positive. The European continent offers companies boasting strong brands that are well-managed, with high-quality products, and are well-positioned to tap into global growth, especially as the weakness in the Euro boosts European exporters. Meanwhile, shares in many of these companies trade on comparatively low ratings.

"Funds that are exposed to countries that form part of the European Union's psychology provide UK investors with a natural progression into overseas markets. This is partly due to close geographical proximity, access to information and brand awareness," says Sheridan Admans, an investment adviser at The Share Centre. "Investing in companies from the European Union should provide diversification that an investment portfolio based solely in UK companies could not,"

So, with a plausible case for investing in Europe, we suggest newcomers could dip their toes into the region via a fund with a flexible mandate, such as the Jupiter European Special Situations unit trust. Launched in 1999, the fund is not restricted in terms of the stock size, countries or sectors in which it can invest, so its manager, Cédric de Fonclare, ranges across a wide spectrum of companies.

Mr de Fonclare has managed the trust since July 2005, during which time its performance has been comfortably in the upper quartile of its funds' group and it has recently received a 'superior' rating from funds-rating analyst Morningstar. Funds in this category are those that Morningstar's analysts think are capable of producing peer-beating returns.

One possible drawback is the fund's fees, which are above average for the fund's category. More important, Morningstar points to Mr de Fonclare's relative lack of experience. He joined Jupiter in 1999 and only started to manage a pan-European fund in 2002. Despite his limited track record, his investment style has proved effective. The fund, which has a relatively concentrated portfolio of between 50 and 70 holdings, sits in a sector containing well over 100 similar funds and has been a top-10 performer over both three and five years. This augurs well for the long term.

Mr de Fonclare prefers companies with growing profits and free cash flows, and predictable revenues. While this type of company dominates his portfolio, Morningstar analysts point out that he has shown himself to be "highly pragmatic, taking advantage of turnaround situations and stocks that he considers undervalued".

Mr de Fonclare also favours companies from the 'core' developed economies of France and Germany, as well as hugely successful non-euro nations, Switzerland and Norway.

"Our strategy remains to look for good quality companies exposed to structural growth and use any market capitulation to increase exposure to our core holdings," he says on his latest fund factsheet. So far his plan has proved effective.

True, this is not a fund that is likely to generate exciting growth. But that's not its aim. For relatively inexperienced investors who want to lock away some capital in high-quality European companies, however, it looks just the ticket. Buy.

Key fund data:

Top 10 holdings

Geographic Breakdown