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HL Multi-Manager European - one year on

Kate Marshall | Mon 29 February 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.

It has been a tumultuous year for global stock markets, Europe included. The Greek debt crisis plagued the headlines last summer, shattering investors' nerves. European markets have since been unable to escape fears over slowing growth in China, falling commodity prices, and increasing regulatory pressures on its banking system.

Despite the turmoil, many European fund managers have successfully outperformed the wider European market. In our view this highlights the ability for active fund managers to add value through their astute stock-picking ability.

With so many funds available however, the decision over which manager to invest with can be difficult. That's why 12 months ago we launched our HL Multi-Manager European Fund, which combines exposure to different fund managers with different investment styles in a single portfolio.

We are encouraged by our strong performance so far. Since launch, the fund has grown by 2.4%*, compared with a loss of 4.5% for its benchmark, the FTSE World Europe ex UK Index, and a 1.2% loss for the sector average. We are also pleased to report that every fund held in the portfolio since launch has outperformed the benchmark.

Please remember past performance is not a guide to future returns and this is over a short time period. *Source: Lipper IM, correct at 26/02/2016.

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What has helped performance?

European small and medium-sized companies have outperformed their larger counterparts over the past year. As the HL Multi-Manager European Fund has a greater bias to these businesses than its benchmark, this positioning has benefited performance. Funds focused on this area of the market, such as the Baring Europe Select Fund, have fared well so far. Our analysis suggests Nick Williams, the fund's manager, has also added value through his stock picking.

The Jupiter European Fund has also performed strongly, helped by its bias to high-quality companies expected to deliver sustainable sales and earnings growth. As concerns over slowing global economic growth have mounted over the past year, many investors have favoured the perceived safety of this type of company. Our research shows the manager's strong stock picking ability has also boosted returns.

On the other hand, the TM Sanditon European Fund has endured a slightly tougher time, although it has still successfully outperformed the benchmark index. We maintain our long-term conviction in Chris Rice, the fund's manager, who has a successful long-term track record, and we believe this fund offers something different to others in the portfolio. Chris Rice positions the fund based on where he believes we currently are in the business cycle. The fund can, at times, look contrarian in nature and is positioned towards areas where the manager sees the greatest value.

What changes have been made?

Few changes have been made to the portfolio since launch, given its long-term focus.

The Henderson European Special Situations Fund was added to the portfolio at launch, however, its manager, Richard Pease, announced he would be leaving Henderson in June 2015 to join a new investment boutique - Crux Asset Management. Richard Pease has continued to manage the Henderson fund under its new guise, the FP Crux European Special Situations Fund, and we maintained our position throughout, following the manager to the new investment group. The fund is currently our largest holding, reflecting our positive outlook.

Elsewhere, we have topped up the holding in the BlackRock European Dynamic Fund, as our conviction in its management team has grown over time. Profits have also recently been taken from some of the stronger performers, such as the aforementioned Crux and Barings funds.

Our verdict

In our view, short-term setbacks often create long-term buying opportunities. 2016 began with a sharp selloff in European markets, although they have recently rebounded. We believe European equities still offer good value and this fund provides exposure to a fairly concentrated collection of fund managers who have proven their ability to deliver long-term outperformance. We believe this combination could be attractive for patient, long-term investors and we feel the multi-manager approach justifies the additional costs to investors.

The portfolio is run by Roger Clark and Lee Gardhouse who monitor performance, rebalance the portfolio and make changes when necessary, with the support of our wider team of investment analysts. Overall, we have aimed to create a diversified portfolio of our favourite European fund managers with different, yet complimentary skillsets. We believe the fund could provide core exposure to European markets, or could be used to provide further diversification to a global equity portfolio.

HL Multi-Manager European is run by our sister company Hargreaves Lansdown Fund Managers.

Find out more about this fund including how to invest

Please read the key features 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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