Top 100 Funds: Europe (5 Funds)

Jupiter European (GB00B5STJW84)

Jupiter European has one of the best performance records of all Europe funds and is among the top five performers in the IA Europe ex UK sector over one, three and five years, over which periods it is well ahead of FTSE World Europe ex UK index.

The fund is concentrated, typically holding 30 to 45 companies, which its manager Alexander Darwall holds for the long term, meaning trading costs eat less into returns.

He invests in companies he considers are world class, and able to sustain profit growth and margins over the long term. He likes companies whose prospects depend as far as is reasonably possible on their own entrepreneurial endeavour rather than factors beyond their control, so are not reliant on macroeconomic trends.

Mr Darwall invests in high-quality European companies, meaning the fund typically has a defensive performance profile, which often gives a degree of protection in falling markets. However, this also means it can lag in rising markets such as in 2016, when it made a total return of 5.2 per cent against 19.7 per cent for its benchmark.

Janus Henderson European Focus (GB00B54J0L85)

Janus Henderson European Focus is run by John Bennett, who is very experienced and has delivered strong returns over his career. However, this fund has underperformed over the past two calendar years, so its recent cumulative numbers don’t look good.

But so far this year it is ahead of its benchmark, FTSE World Europe ex UK index, so its performance may be turning.

“The fundamental research process leads to a portfolio blend of sector themes and stock-specific ideas,” comment analysts at FundCalibre. “John looks at companies with a good track record and the potential to surprise in the future. Turnover is generally low. The managers can, and do, deviate from the benchmark in their stock selection.”

This leads to the fund deviating from benchmark returns and it often outperforms when markets are not doing well and lags rising markets.

Janus Henderson appointed a co-manager to the fund in July – Andrew McCarthy. He joined the company’s European equities team from USS Investment Management, where he was a portfolio manager specialising in industrial and consumer sectors. Andrew has also held positions at Capital International Research and is a CFA charterholder with 19 years’ experience in the industry.

FP CRUX European Special Situations (GB00BTJRQ064)

FP CRUX European Special Situations has an outstanding record of beating its benchmark, FTSE World Europe ex UK index, and the IA Europe ex UK sector average. It is run by highly experienced manager Richard Pease, who has more than three decades of investment experience, alongside James Milne.

“The track record over the very long term has been impressive, with Mr Pease’s stock selection skill complemented by his typical preference for investing in higher risk, but higher return, medium- and small-sized European companies,” says Rob Morgan at Charles Stanley.

But over shorter periods, such as the first seven months of this year, the fund can underperform and its returns can be volatile. It has recently underperformed due to being underweight in financials and consumer goods, such as luxury goods and automobile manufacturers, which gained in the wider market (see our recent fund tip, IC, 7 September 2018).

Schroder European Alpha Income (GB00B6S00Y77)

As well as paying an income, Schroder European Alpha Income makes very good total returns, so is also a good option for growth investors, especially if they reinvest the dividends by holding the accumulation share class. The fund has a good record of beating FTSE World Europe ex UK index and the IA Europe ex UK sector average.

However, its short-term cumulative total returns do not look so good, partly because the fund is overweight financials relative to its benchmark. “[This is] an area of value we are overweight given the lack of ownership among active funds and the fact they are inflation beneficiaries, at least for the initial rate rise cycle,” explains James Sym, manager of Schroder European Alpha Income. “This is the sensitivity we would expect from our portfolio and, while we wouldn’t want to underperform, it demonstrates that the portfolio has a skew – value, rising rates, higher inflation – we believe offers good anti-consensual risk/reward characteristics.”

Mr Sym invests in companies whose share prices he thinks do not reflect the future prospects for the business, typically holding 30 to 50 stocks. He takes ‘a business cycle investment approach’ – recognising that different stocks have the potential to outperform at different points in the economic cycle.

Barings Europe Select Trust (GB00B7NB1W76)

Barings Europe Select has consistently delivered good returns by investing in European smaller companies, which its managers define as constituents of the bottom 30 per cent of the total market capitalisation of Europe’s listed companies.

The fund’s lead manager, Nicholas Williams, and Barings’ European equity team, look to exploit market inefficiencies and identify mispriced stocks. They take a quality growth at a reasonable price investment approach, aiming to find attractively valued companies – particularly ones whose strategic positioning and competitive strengths can drive sustained improvements in their profitability and returns.

“Nick Williams combines a sensible investment philosophy with an impressive buy/sell discipline in an area of the market where active management can add significant value,” says Rob Morgan at Charles Stanley. “However, assets under management have grown and that is worth keeping an eye on as this may at some point hamper the process.”

The fund has assets of about £2.17bn.