European units regaining ground

EUROPEAN unit trusts have shown reasonable returns, on average, over the last six months, although investors who piled in three years ago after the fall of the Berlin Wall will still be feeling sore.

The average profit on European-invested trusts over three years to the beginning of this month was a little over 4.68 per cent. Over one year the profit was 8.07 per cent, but over six months it was 20.91 per cent.

Fund managers say that European markets began to anticipate interest rate cuts around six months ago. Prices have been drifting in the last few weeks. But although there has been some reaction to the political upheavals in the former Soviet Union, it has not been as severe as might have been expected. Fund managers point out that while some European companies, notably German banks, have a direct exposure to the Russian economy, trade has not built up to an extent that poses a widespread threat to Europe. John Govett Unit Management's European Bear fund is one of a range of futures-linked unit trusts. The bear fund is designed to do well when markets are falling, while its index fund will do well when they rise. The bear fund is ranked third out of the whole European unit trust sector over a year; the index fund ranks 66th over a year and 31st over six months.

Govett also has a conventional 'stock picking' European fund, Govett European Growth, in which the value of units rose more than 22 per cent over the last six months.

Peter Pejacsevich, the chief investment officer at John Govett, believes the European markets are entering a phase in which there could be opportunities for well-run stock-picking funds to outperform market indices.

----------------------------------------------------------------- THE BEST AND WORST PERFORMERS ----------------------------------------------------------------- European unit trusts The best pounds 1 Perpetual European Growth. . . . . . . . . . . .130.02 1 Eagle Star European. . . . . . . . . . . . . . .130.02 3 Mercury New Europe. . . . . . . . . . . . . . . 129.91 4 Cannon European. . . . . . . . . . . . . . . . .129.25 5 CU European Growth. . . . . . . . . . . . . . . 128.58 The worst 128 Baring European Smaller Companies . . . . . . 111.90 129 Britannia Life European Growth. . . . . . . . 111.22 129 Save & Prosper European Smaller Companies . . 111.22 131 Aetna Iberian Growth. . . . . . . . . . . . . 109.83 132 Govett MIS European Bear. . . . . . . . . . . .99.66 ----------------------------------------------------------------- Value of pounds 100 over six months to 1 March, 1993. Offer-to-bid, net income reinvested. Source: Micropal -----------------------------------------------------------------