Cash flows into Europe as economies bounce back
Traditional sectors are a good bet despite the high euro. Julian Knight reports
Sunday 22 November 2009
One credit crunch later and the economic order in Europe changed dramatically.
It used to be Britain in Europe's fast lane, more dynamic, entrepreneurial Blighty running rings around the staid, manufacturing-based and heavily bureaucratic French and German economies. Now, though, Britain looks likely to be the last of the major economies to drag itself out of recession. The economies of France and Germany, on the other hand, as the recent gross domestic product figures show, are pulling out of recession at pace, leaving Britain in their wake.
But what does this mean for private investors, and what are the prospects for turning a profit? "Investors have virtually ignored European companies and funds over the past decade for two reasons. Firstly, many lost a packet during the bust in technology stocks, and secondly, other parts of the world have been much more dynamic than Europe," said Ben Yearsley from investment advice firm Hargreaves Lansdown. The Investment Management Association (IMA) figures show that the least favourite sector among private investors in three of the past nine years has been Europe.
But times seem to be changing. "As an industry we have seen money flowing into European funds and shares from institutional investors such as pension funds. This has not been replicated by private investors yet but it may be soon," said Barry Norris, manager of Ignis Argonaut European Alpha fund. And in August, the IMA figures showed Europe, not the US or emerging markets, topping the league table of total cash being invested.
It is probably difficult to think of Europe as the next big thing after so long in the investment doldrums, but there are undoubtedly some compelling reasons to look to the continent for investment opportunities. "We are in the recovery phase. Companies that ran down their inventories during the turmoil of last autumn are now replacing them, while credit markets have eased and crucially European companies are paying dividends to shareholders," said Mr Norris. Mr Yearsley said that Europe benefits from having strong brands in traditional sectors, an attractive proposition to investors still feeling the pain of the recession. "Europe is full of good companies in areas such as car manufacturing and pharmaceuticals. Big brands appeal in uncertain times," he added.
Direct investment in shares is always highly risky, and it's not as easy for the small private investors to buy company shares overseas as it is in the UK. The overwhelmingly popular route for investors looking to Europe is to go for funds such as unit and investment trusts which invest in a basket of company shares. Mr Yearsley likes the look of long-standing fund Jupiter European and Henderson/New Star European special situations fund. "The latter fund invests in smaller to medium sized companies, riskier but potentially quite rewarding," he said. Fund expert Adrian Lowcock from independent financial adviser Bestinvest likes Casenove European. "It's a blue-chip fund offering broad exposure, investing in any or all European markets outside the UK, and makes a good core holding for any portfolio," he said. "It has a very experienced manager, and has delivered consistently good returns."
But there are a few flies in the ointment, said Mr Lowcock. "The euro is very high at present which means that it may well lose value during the term of the investment which could adversely affect returns." Mr Yearsley puts it this way: "If you buy a European fund today and it gains, say, 30 per cent over three years but the euro devalues against the pound by 25 per cent, when you come to take your money back you gain only 5 per cent. Currency risk always has to be factored in and the worrying thing is I can't see any good reason for the euro being as high as it is."
Even Mr Norris has his concerns. "My worry is that central banks will raise interest rates too soon and kill off the recovery but I reckon there is no danger of that till summer next year."
Debt in Britain: Numbers seeking help on how to cope with mounting bills goes up by more than half in three years
Bargain Hunter: BT improves its mobile reception with 'incredibly competitive' deals
Questions of Cash: Why was my case ignored by My Civil Service Pension?
Offset your mortgage and save thousands
Women to lose benefits from contracted-out pension scheme
- 1 Vladimir Putin says Russia will fight for the right of Palestinians to their own state
- 2 Ohio Democrat Teresa Fedor speaks out during abortion debate to reveal she has been raped – and is interrupted by laughter from Republicans
- 3 Germanwings plane crash: I have depression. That doesn't make me a psychopath
- 4 The West has it totally wrong on Lee Kuan Yew
- 5 The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
The West has it totally wrong on Lee Kuan Yew
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...
Day In a Page
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station