Paul Wild is the manager of the JOHCM Continental European Fund, which features on the Wealth 150 list of our favourite funds. In the lead up to the UK's referendum on EU membership he took a more cautious stance in anticipation of heightened volatility surrounding the vote.
Broadly speaking he has continued this approach since the end of last week. The fund now has more exposure to healthcare, consumer staples and telecommunications companies than the fund's benchmark, the MSCI Europe ex. UK Index. These industries are less sensitive to deteriorations in economic growth as they supply essential goods and service that are not easy to cut back on. Their shares have therefore tended to perform better during tougher times, although they can still fall in value.
In contrast, there is less exposure to the financial sector and other companies which tend to perform better when the economic outlook is stronger. Paul Wild believes the European banking system is in better shape than in 2008 when the global financial crisis stuck, but banks in particular are hindered by ultra-low and negative interest rates, as it reduces their profits on loans, for example. Other economically-sensitive investments to have been reduced include car-maker Renault and tyre-maker Michelin.
Economic growth and consumer demand across Europe had been relatively good recently, but confidence is likely to take a knock in the short term and growth forecasts for 2016 and 2017 have been cut. Elections across the continent, including in Italy, France and the Netherlands over the coming year are also likely to affect sentiment at times.
However, Europe is home to many companies which have stood the test of time and survived periods of uncertainty in the past. Paul Wild expects any stock market turbulence over the coming weeks and months to throw up opportunities to invest in good companies at attractive prices. We are confident his disciplined investment approach, combining individual company analysis with prevailing economic and market conditions, should aid performance over the long term.
Our view on this fund
Paul Wild's cautious stance paid off in the immediate aftermath of the referendum, but it could also hold the fund back if stock markets recover strongly. Over the long term he has added considerable value for investors, which our analysis suggests has been driven by good stock selection. While stock markets are likely to remain vulnerable in the shorter term we continue to believe Paul Wild will do an excellent job for long-term investors and the fund remains on the Wealth 150.
Please note this fund carries a performance fee details of which can be found in the fund's Key Investor Information Document. As it is an offshore fund, investors will not normally be protected by the Financial Services Compensation Scheme.