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Schroders: Europe stands at a crossroads

Kate Marshall | Thu 20 August 2015

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.

Europe stands at a crossroads according to James Sym, manager of the Schroder European Alpha Plus Fund.

On a positive note, growth-friendly economic policies could help engender confidence in the region. The manager believes that measures taken since the onslaught of the financial crisis to improve corporate balance sheets and improve profitability could ultimately benefit investors.

That said, Europe also faces vulnerabilities, with inflation and economic growth remaining low. The austerity measures in place in some countries could also make debt harder to service and lead to lower living standards and a less vibrant economy.

On balance, however, James Sym believes potential remains for investors willing to take a long-term view. Valuations look reasonable; the economy is undergoing a gradual recovery; while sentiment towards the region remains largely negative, offering opportunity for value-seeking investors with a more contrarian mind-set. Presently, the manager is finding the greatest value in more economically-sensitive areas of the market, such as financials where almost one third of the portfolio is invested.

The manager has recently added a number of positions to the portfolio, such as NH Hotels, a Spanish and Italian hotelier. The company has suffered with high levels of debt in recent years, but he believes it is working hard to reduce it. The hotel group is also benefiting from the popularity of its newest range of premium hotels located in major capitals across Europe and America.

James Sym assumed responsibility for the fund in June last year and the fund has struggled to outperform the wider market. According to the manager, corporate earnings growth failed to materialise as expected in 2014, meaning companies in more defensive sectors, such as healthcare and consumer staples, were favoured over more economically-sensitive firms whose earnings streams are often viewed as less stable. Given the fund’s lack of exposure to defensive areas of the market, it missed out on much of these gains. The fund’s positioning has, however, come to fruition so far this year, with the fund outperforming both its benchmark and the sector average. Please remember there are no guarantees this performance will continue.

The fund can invest in smaller companies and is a concentrated portfolio of 40 stocks, which increases risk.

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Our view on this fund

In our view, James Sym has a good, albeit relatively short, track record. In addition to the European Alpha Plus Fund, he manages the Schroder European Alpha Income Fund. He has been co-manager of the latter fund since launch in October 2012, before taking over the role of lead manager in June 2013. Since launch, this fund has grown by 81.5% against 56% for the FTSE World Europe ex UK index and 54.3% for the sector average. However, this is not reflective of the performance of the Schroder European Alpha Plus Fund and is not a guide to future returns.

Annual percentage growth
Aug 10 -
Aug 11
Aug 11 -
Aug 12
Aug 12 -
Aug 13
Aug 13 -
Aug 14
Aug 14 -
Aug 15
Schroder European Alpha Income N/A N/A 49.2% 11.2% 11.8%
IA Europe ex UK 13.2% -11.1% 36.6% 0.8% 12.8%
FTSE World Europe ex UK TR GBP 8.1% -10.7% 36.4% 2.9% 10.2%
Schroder European Alpha Plus 15.3% -8.4% 31.5% -8.1% 11.0%

Past performance is not a guide to future returns.
Full year performance figures before 01/08/2012 are unavailable for the Schroder European Alpha Income Fund. Source: Lipper IM* to 03/08/2015

We are encouraged by James Sym’s performance so far, and we view it positively that he has the backing of a well-resourced team at Schroders. That said, we do not currently feel the manager’s track record is long enough to consider the fund for inclusion on the Wealth 150 list of our favourite funds across the major sectors.

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.

The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
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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