Europe Day, which celebrates peace and unity in the region falls this week on 9 May. It marks the anniversary of the Schuman declaration, which is considered to mark the beginning of what is now the European Union.
What’s the story in European markets?
Tom Stevenson, investment director, said that Europe has had a tough time economically, but the tide has turned.
Over the past year, stock markets in Europe have performed well but they have trailed behind the US and Japan.
DAX – the German Stock Exchange has shot up by 23% in the past six months. That’s not too far behind the Nasdaq, which was up by 24% in the same period. The STOXX Europe 600 which comprises of large, mid, and small cap companies among 17 European companies rose by 18% over the past six months.
Tom’s latest Investment Outlook said Europe is showing good signs of recovery, but it has faced a fair share of challenges in the last couple of years.
The Russia Ukraine war caused the region to face spiralling energy costs. Interest rates were another major challenge and global manufacturing also saw a slowdown.
But Europe is breaking free. Inflation fell to 2.4% at the end of March. There are also hopes that the European Central Bank (ECB) will cut rates faster than the Federal Reserve.
“Many of the headwinds for Europe are now turning into tailwinds…Any shift away from the expensive US market could benefit the region,” said Tom.
How to invest in Europe?
Here are three fund ideas from our Select 50:
1. Comgest Growth Europe Ex UK fund
This is an actively managed fund that consists of companies that the investment manager believes are high quality long-term growth firms. These companies have their headquarters or carry out most of their activity in any European country, excluding the UK.
The fund’s top 10 holdings contain some familiar names including Novo Nordisk, a Danish pharmaceutical company, Accenture, an Irish based information technology company, LVMH, a French luxury goods company and budget airline Ryanair.
Investors will gain exposure to a variety of European countries including the Netherlands, Denmark, France, Switzerland, Spain, and France.
Our experts like this fund because the manager selects European companies with high quality characteristics, such as an established brand, or a unique product or technology.
This fund may be appropriate for investors looking to seek an exposure to Europe and who have a long-term horizon. It may also be a sensible choice on the riskier side of a portfolio.
The fund’s ongoing charge is 0.93%.
2. Schroder European Recovery Fund
This is an actively managed fund that aims to provide growth over a three-to-five-year period by investing in equity and equity related securities of European companies, excluding the UK.
The managers of the fund invest in a portfolio of companies that they believe are significantly undervalued relative to their long-term earnings potential.
The fund’s top 10 holdings include Sanofi, a French pharma company, Ageas, a Belgium insurance firm, BNP Paribas, a French bank and Allianz, a German financial services provider.
Investors will get exposure to France, Belgium, Sweden, and the Netherlands.
Our experts like this fund because the managers are value investors that adopt a contrarian approach. They have been investing on this basis before the 2008 global financial crisis.
This fund may be appropriate for an investor with a long-time horizon.
The fund’s ongoing charge is 0.96%.
3. Vanguard FTSE Developed Europe ex UK
This is a passively managed fund that aims to track the performance of the FTSE Developed Europe ex UK Index. It comprises of stocks of large and mid-capitalisation companies in developed European countries, excluding the UK.
The fund’s top 10 holdings include Novo Nordisk, Nestle, LVMH, Roche Holding, a Swiss pharma company, Siemens, a German automation company, and TotalEnergies, a French energy and petroleum firm.
Like the funds above, the fund offers exposure to Denmark, Switzerland, France, Germany, and the Netherlands.
Our experts like this fund as it’s a low-cost index-tracking fund that invests in companies listed in Europe, excluding the UK. The fund also provides a broad-based European exposure.
This fund may be appropriate for investors seeking an exposure to Europe, who have a long-term horizon and are cost conscious.
The fund’s ongoing charge is 0.10%.
