Barings Europe Select: May 2026 fund update

• Lead fund manager Nick Williams has over 35 years’ industry experience, making him one of the most experienced investors in the European Smaller Companies sector

• Williams and his team invest in small and medium-sized European companies, which is different from most other European funds

• Co-manager Rosie Simmonds will leave Barings at the end of September, but the team remains well-resourced

• The fund is on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

Barings Europe Select is different from many other European funds. It invests in small and medium-sized companies with a GARP (Growth at a Reasonable Price) investment style. This means the managers invest in companies they believe can grow earnings steadily, but where the share price is lower than the earnings potential suggests it should be. Many other European funds focus on larger, more established companies. The focus on smaller businesses increases risk though.

The fund could be used to diversify the European part of an investment portfolio, or a broader global portfolio focused on growth. A focus on smaller firms can also help diversify a long-term portfolio with a bias to larger companies.

Manager

Nick Williams co-leads the Developed Market Equities team at Barings. He has over three decades of experience investing in Europe and has managed funds investing in companies of all sizes. We believe this has given him expert knowledge of the wider European market over the length of his career.

Williams joined Barings in 2004 and took over management of the Europe Select fund shortly after. There aren’t many fund managers with such a long and successful track record of investing in this less familiar area of the European stock market. He’s demonstrated a long-standing commitment to his investment process, a quality we rate highly.

Williams is currently supported by two co-managers – Rosie Simmonds and William Cuss. Simmonds is due to step down as a co-manager and leave Barings at the end of September. She’s been with the firm for 16 years, so it’s disappointing to see the team lose valuable experience. That said, Cuss has spent 10 years working with Williams and they’ll use the same investment approach, which ensures continuity. In addition, they plan on recruiting another co-manager to join the team with existing experience investing in Europe.

Zoe Deady joined the team in 2021 and is a dedicated European smaller companies analyst. The team also work closely with Barings broader team of analysts and fund managers, sharing research and collaborating on ideas.

We’ll continue to monitor any ongoing changes to the team and the impact this may have on the fund.

Process

Williams has followed the same investment process for many years – investing in companies he believes can grow earnings steadily, but where the share price is lower than the earnings potential suggests it should be.

Williams has instilled this focus across the team. Together they look for smaller European companies they believe are in good financial shape, have low levels of debt, and are run by quality management. The overall focus is ‘stock selection’, which means they focus on the prospects of individual companies and invest in those they believe will do well regardless of what’s going on in the economy.

The managers only invest in a company if they believe its share price can rise by at least 40%. If the shares hit their price target, the team either sells some shares and takes profits, changes the price target if they think there’s further room for growth, or sells fully and invests in a different opportunity. If the share price falls by 20% the team sells the investment and moves on. We like the team’s disciplined investment approach, which has served investors well over the longer term.

Currently the fund is focused on sectors including financials, industrials and companies that could benefit from discretionary consumer spending. Sectors like real estate tend to be avoided as companies here don’t often meet the quality and growth characteristics the managers look for.

Recent new investments include Scout24, a German online property portal. Concerns around potential AI disruption to online platforms gave the team an opportunity to invest at a lower share price. They believe the concerns are overstated and are encouraged by the firm’s recent profit growth.

Swiss firm Inficon was also added. It makes specialised instruments that help factories detect gases and monitor processes, so they run safely and efficiently. These sensors are used in high-end manufacturing and means the company provides exposure to growth in semiconductor manufacturing equipment.

Culture

We view Williams as the key manager behind this fund, and currently most of our conviction lies with him. But we’re satisfied by the fact he's built a collaborative team around him. All team members follow the same process, and they're encouraged to bring challenge and debate to each other's investment ideas, which we think is important. We’re mindful of recent and upcoming team changes though, which we’ll continue to monitor.

The team is also influential throughout Barings, among other analysts and portfolio managers, which reflects their strength and fund management abilities.

ESG integration

Barings believes that incorporating ESG (Environmental, Social and Governance) factors into its analysis provides a more thorough understanding of the complex issues, risks and value drivers that may impact its funds over time. All Barings fund managers therefore incorporate ESG criteria into their investment processes, with the aim of improving returns. They use an ‘ESG assessment’ to identify improving or deteriorating ESG standards, and this can impact the assessment of a company.

Barings fund managers discuss ESG issues when they meet companies. The manager or analyst responsible for the financial analysis is also responsible for the ESG analysis, which means it’s fully integrated into the investment process. They generally prefer to engage with companies, rather than exclude them completely, but the firm will not knowingly invest in companies that produce, stockpile or use controversial weapons.

While Barings continues to develop its approach to ESG, the team on this fund has integrated ESG factors into their work for several years. They use nine key topics to help assess a company’s ESG impact, which could highlight businesses that use more sustainable practices and can thrive over the long term. This may help uncover risks that are less obvious through more traditional company analysis.

Cost

This fund is available at an annual ongoing fund charge of 0.82%, but we've secured HL clients an ongoing saving of 0.10%. This means you pay a net ongoing charge of 0.72% and makes it the lowest-cost actively managed fund available in the European Smaller Companies sector through HL.

The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. The HL platform fee of up to 0.35% per year also applies, except in the HL Junior ISA, where no platform fee applies.

Performance

Since Williams became fund manager in January 2005, the fund’s returned an impressive 729.38%* versus 656.09% for the average fund in the IA European Smaller Companies sector. Please remember that past performance is not a guide to future returns.

Over the long term, the team’s focus on quality means we expect the fund to hold up better than the market when it falls but not keep up quite as quickly when the market rises. We’ve seen this over the past 12 months – the fund has grown 15.42%, which is a strong return for a 12-month period, though it’s lagged the 17.12% return for the average fund in the sector.

The fund’s GARP investment approach and focus on quality has also been a headwind. Investors have favoured ‘value’ companies – typically more economically sensitive businesses that may have fallen out of favour and have the potential to rebound in future – an area the team tends to avoid.

Over the longer term we continue to believe the fund will benefit from an experienced team and robust investment process. In addition, quality growth companies are expected to see greater earnings growth over the coming year compared with value companies. If this is noticed by more investors and sentiment changes, the share prices of companies in the fund could benefit, though as always there are no guarantees.