As part of its fund selector analysis on Europe ex UK funds, Morningstar has identified which equity funds to watch based on their assets under management.
Macroeconomic and sector trends
The Henderson Gartmore Continental European Fund is run by the highly-experienced John Bennett, director of pan-European equities at Henderson, with support from co-manager Asim Rahman, who has worked with Bennett on this strategy since 2003.
Bennett enjoys support from a close-knit team, and the merger of Henderson with Janus is not expected to have a meaningful impact on the running of the fund. Bennett has a wealth of experience managing European equity portfolios and he has put his extensive knowledge of the market to good use, driving the fund to outperform its average Morningstar Category peer and benchmark during his tenure on this fund from 2010.
He and the team pay close attention to global macroeconomic and sector trends. They look for businesses with genuine pricing power, strong cash generation and good management, at compelling valuations. The manager pays little heed to the benchmark when constructing the relatively concentrated portfolio of 50-65 names.
With investments driven by thematic and stock-specific conviction, the portfolio is characterised by large active stock, sector and country positions. The fund has a Morningstar rating of Silver.
Bets of conviction
The BGF Continental European Flexible Fund has been managed by Alister Hibbert since 2008, when he joined BlackRock from Scottish Widows Investment Partnership (Swip). The move was led by Nigel Bolton, who implemented a cohesive team structure that has yielded strong results since. Hibbert is a talented manager in his own right and has around 20 years of investment experience.
He follows the same approach here as he did at Swip, aiming to unearth companies with medium- to long-term earnings’ power that is significantly higher than the market and not factored into the share price. However, he has a flexible approach to investing and will also look for restructuring and turnaround situations where appropriate. Top-down considerations come into play through team discussions on themes and sector trends. The fund is unconstrained and Hibbert does not shy away from making large sector bets where he has strong conviction.
The approach is characterised by relatively high turnover and a reasonably concentrated portfolio, and the manager’s strict sell discipline can lead to rapid shifts in the portfolio. The fund is rated Silver by Morningstar.
Incremental outperformance
The JOHCM Continental European Fund has a Morningstar rating of Silver. Paul Wild became lead manager in April 2010 but his association with the fund dates back to 2003 when he was hired as a co-manager.
Wild uses a clear investment strategy that has proved successful and has provided investors with solid returns over time. He starts by taking macro views, which inform the portfolio’s sector weightings, and then hunts for stocks that fit these views across the European ex UK equity universe, making his long investment experience key to the process.
At the stock level, he looks for firms with strong earnings growth and momentum, as well as robust balance sheets and free cashflows. Wild’s top-down discipline is combined with an awareness of the benchmark at the sector level, so active sector positions are not typically outsized relative to the index.
Wild aims to deliver incremental outperformance across the market cycle, and the fund has outperformed its average Morningstar category peer every year on a calendar-year basis since he took control.
Top rated funds
