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FP Crux European Special Situations - weathering the Brexit storm

Kate Marshall | Mon 11 July 2016

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

Richard Pease is one of the most experienced investors in the European sector, having managed European funds for more than 25 years. In his view, the UK vote to leave the EU introduces additional political uncertainty to the entire European region. He does not believe the continent is set to enter an economic crisis, however, he is mindful consumer confidence and business investment could be affected for some time.

The FP Crux European Special Situations Fund, run by Richard Pease, held up well in the immediate aftermath of the referendum. The manager avoided some of the worst affected areas of the market, such as UK and southern European banks, which saw significant share price falls. The fund's investments in financial businesses are instead mainly located in northern Europe and largely operate in the Swedish and Norwegian currencies rather than euros or pounds.

Richard Pease has tended to avoid southern European businesses for some time, believing they are more likely to be affected by political wrangling than those located in other areas. Southern European economies are also struggling with high levels of debt and a banking crisis. Instead the fund is biased towards companies situated in countries such as Germany, Sweden and France.

The manager does not expect to make any significant changes to the fund following the referendum and maintains his longstanding investment approach. He continues to focus on world-class businesses that may have originated in Europe, but are internationally competitive and operate on a global scale. He specifically seeks cash-generative companies with high barriers to entry from competition, which he feels are built to prosper in both good and bad times for the wider economy. This means he tends to avoid companies exposed to political or regulatory intervention, which can be highly unpredictable.

Current investments include Stabilus, a German manufacturer of gas springs for cars, including a product range that allows the boot of a car to be opened at the push of a button. The company already has an 80% share of the market and Richard Pease expects it to benefit from the increased use of gas springs in cars and other industries in future.

The manager also currently favours a number of outsourcing businesses. He expects they will perform well even when markets are tough as they offer other companies the opportunity to make cost savings by outsourcing certain functions. Spie, a French electrical and mechanical maintenance company, was recently added to the portfolio, while other investments include French contract caterer Elior.

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Our view on this fund

Richard Pease's focus on companies that he believes will provide some resilience during turbulent market conditions has paid off over both the short and longer term. The manager has been successful in selecting companies that have delivered good returns for their investors regardless of the wider economic and political environment, in our view. He has an exemplary long-term track record and our analysis attributes his performance to his strong stock picking ability, although there are no guarantees this will continue.

The manager runs a relatively concentrated portfolio of around 60 holdings, which enables each holding to make an impact on returns. He also invests flexibly across companies of all sizes, including small and medium-sized companies. We feel this approach has the potential to add value over prolonged periods, although it is a higher-risk strategy.

The fund currently features on the Wealth 150+ list of our favourite funds at the lowest ongoing charge. Please note the charge to hold investments in the Vantage Service is up to 0.45% p.a.

Please note the fund's charges can be taken from capital, which can increase the yield but reduces the potential for capital growth.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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