Over the past year concerns have mounted over slowing global economic growth. In this environment many investors have favoured the perceived safety of more defensive areas of the market. High-quality companies, expected to deliver sustainable sales and earnings growth, have therefore performed particularly well over the course of the year.
According to Cédric de Fonclare, manager of the Jupiter European Special Situations Fund, the valuations of these higher-quality businesses have reached unsustainable levels. In particular food and beverage companies have benefited from this trend, so the manager has generally avoided this area of the market.
Going forward, Cédric de Fonclare will continue to seek profitable companies with growth potential that he feels offer some resilience against future economic shocks, whilst keeping a careful eye on valuations. He also aims to avoid 'value traps', in which firms are valued attractively, but are in terminal decline or incapable of positive change.
Chemicals-company Sika, for example, is a current portfolio holding. The company has held onto cost savings, while some of its competitors have struggled against a backdrop of declining commodity prices. The manager suggests Sika benefits from its unique product line, such as adhesives that cut the cost of assembly for cars, which customers may struggle to find elsewhere. The business has proven successful across the globe, generating growth even in challenging markets such as Brazil.
Valeo, which supplies products to automotive manufacturers, is also held in the fund. Cédric de Fonclare believes the company will benefit from the development of self-driving cars, as well as the trend of electronic components making up a greater proportion of the cost of new vehicles.
Our view on this fund
The Jupiter European Special Situations Fund was removed from the Wealth 150 list of our favourite funds across the major sectors in March 2015. After conducting a full review of the IA Europe (excluding UK) sector, we felt this fund had not added enough value ahead of its peers in recent years. In addition the fund has a relatively high management fee. Where we feel a fund is exceptional, it can be worth paying a higher management charge, otherwise we generally prefer funds with lower fees.
|Annual percentage growth|
| Feb 11 -
| Feb 12 -
| Feb 13 -
| Feb 14 -
| Feb 15 -
|Jupiter European Special Situations||-8.5%||23.2%||11.1%||4.6%||3.1%|
|IA Europe ex UK||-11.4%||23.3%||12.1%||5.1%||2.2%|
Past performance is not a guide to future returns. Source: Lipper IM to 01/02/2016.
Cédric de Fonclare is an experienced European fund manager and we believe his focus on quality and attractively-valued companies, backed by a strong management team and good earnings growth, could see the fund fare well over the long term. That said, we currently hold the remaining Wealth 150 fund managers in higher regard.
Our preferred funds for new investment in the IA Europe (excluding UK) sector currently feature on the Wealth 150. Please note that in addition to a fund's management fees, our Vantage charge of up to 0.45% per annum also applies.