Funds find a safe European home as the world goes crazy

DESPITE the setback in world stock markets during the past couple of months, investors in European unit and investment trusts must be feeling pleased with themselves. As the tables show, anyone who has held units for more than a few months is sitting on sizeable gains.

There are more than a dozen European investment trusts and 125 unit trusts. Actively managed funds do well in Europe: unlike most UK-based funds, they have beaten pan-European indices over time.

So what makes for a top performing European fund? "We are very focused on companies that are growing rapidly," says Rory Powe, fund manager of the pounds 530m Invesco European Growth fund, the best performer over the long term.

"We invest in those that occupy a dominant market position and that can continue to grow within their national economies, despite the state of the economic cycle."

Managers at the best-performing funds search out companies that meet their investment criteria rather than decide to put a set percentage in each country based on its share of the European market.

"However, we never have more in a country than 10 percentage points more than its share of the index," says Mr Powe. "In the case of Germany - around 21 per cent of the European index - we'll never have more than 31 per cent."

When it comes to looking at business sectors, many of the top funds have portfolios heavily skewed to investment in service companies.

Mr Powe says: "It is difficult to find fast-growing manufacturers. They are at a competitive disadvantage because of the high labour and social costs in Europe. So we don't have large holdings in chemical, motor, pulp and paper, and so on. Instead we prefer areas such as telecommunications, health-care and business software."

Until a few years ago most mainland European companies were run as private empires. They paid scant attention to their shareholders and saw no need to have meetings with their investors. If they wanted to expand, they had a cosy chat with their bankers. Now they have learnt about equity capital and increasing shareholder value. Low inflation has meant that raising equity is cheaper than borrowing money. In return, investors expect long term growth and increasing dividends. This is something that the companies have learnt to deliver. "We look for above-average returns from taking below average risks," says Charles Glasse of M&G. "The restructuring of European companies over the past few years has given us plenty of good choices."

And this trend is expected to continue. Most fund managers are looking to Europe to provide the safest investment haven, as well as being able to produce attractive growth for the foreseeable future.

The single currency will have a massive impact on these funds. Vicky Hastings, a fund manager with the pounds 1.1bn Mercury European Privatisation Fund, points to the stimulus this is expected to give to the stock markets of the 11 countries that will be in EMU at inception. She says the single currency brings "the prospect of even lower inflation and lower interest rates in these countries that are still recovering from recession" and that the outlook for European shares is very positive. Rory Powe, of Invesco, agrees but he does add a note of caution, warning that Europe cannot be isolated from the bearish winds that are affecting all the main stock markets. He believes investors may find medium term gains lower than we have seen over the past few years. "The European market will still perform well over the long term but it may become more difficult for the immediate future," he says.

TOP PERFORMERS OVER ONE YEAR (to 31/8/98)

Fund Growth %

Baring German Growth (ut) 49.3

Invesco European Growth (ut) 44.8

CF Odey European Acc (ut) 42.6

Invesco European Small Cos (ut) 39.3

Newton European (ut) 36.9

Royal London European Growth (ut) 36.5

Martin Currie European (IT) 36.4

F&C European Exempt Inc (ut) 36.4

Gartmore European Sel Opps (ut) 34.7

CU PPT Europe Growth (ut) 34.5

Average European investment trust 21.0

Average European unit trust 21.6

FT/S&P World - Europe Index 18.5

TOP PERFORMERS OVER FIVE YEARS (to 31/8/98)

Fund Growth %

TR European Growth (IT) 240.4

Invesco European Growth (UT) 209.5

Gartmore European Sel Opps (UT) 206.0

Invesco European Small Cos (UT) 197.6

Threadneedle Euro Sel Gt Acc R (UT) 196.3

Jupiter European (UT) 182.7

Baring Europe Select (UT) 177.2

Royal London European Growth (UT) 166.7

Friends Prov European Growth (UT) 164.4

Average European investment trust 111.1

Average European unit trust 115.8

FT/S&P World - Europe Index 101.4

TOP PERFORMERS OVER 10 YEARS (to 31/8/98)

Fund Growth %

Invesco European Growth (UT) 540.4

Jupiter European (UT) 505.5

Invesco European Small Cos (UT) 504.5

Baring European Growth (UT) 503.7

Scottish Widows European (UT) 496.9

Gartmore European Sel Opps (UT) 492.9

Friends Prov European Growth (UT) 488.6

Old Mutual European (UT) 482.7

Royal London European Growth (UT) 480.1

Fidelity European (UT) 469.4

Average European investment trust 363.4

Average European unit trust 345.5

FT/S&P World - Europe Index 309.9

PROMOTED VIDEO
News
REX/Eye Candy
science
News
A photo of Charles Belk being detained by police on Friday 22 August
news
News
i100
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
News
i100
News
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

£50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?