"Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what's actually happening to the companies in which you've invested." Peter Lynch
Attempting to interpret wider economic issues or forecasting market movements is a fruitless effort according to Sam Morse, manager of the Fidelity European Fund. He feels his time as an investor is more wisely spent analysing the long-term prospects for individual companies, and looking through short-term market 'noise'.
Sam Morse took over management of this fund almost six years ago - it was a task not to be taken lightly, as his predecessors included some of the investment industry's most well-known fund managers; Anthony Bolton and Timothy McCarron. Unperturbed, the new manager put his own stamp on the fund and he has since run the fund in a far less aggressive style than the previous managers.
Sam Morse's style is benchmark-aware, meaning the fund's sector allocation does not tend to deviate significantly from its benchmark, the FTSE World Europe ex UK index. The fund's performance is therefore unlikely to deviate significantly from the benchmark. However, this way, Sam Morse believes he is able to deliver steady and consistent outperformance of the index over the long term.
Under Sam Morse's stewardship, the fund has grown by 43.2%* compared with 33.2% for the benchmark, and has achieved this with considerably less volatility than the wider market. Although please remember this is not a guide to how the fund will perform in future.
|Annual percentage growth|
| Oct 10 -
| Oct 11 -
| Oct 12 -
| Oct 13 -
| Oct 14 -
|FTSE World Europe ex UK||-15.10%||16.90%||27.10%||4.10%||-0.40%|
Past performance is not a guide to future returns. Source: Lipper IM * to 01/10/2015
Our analysis also demonstrates that the fund has held up relatively well in a falling market, although the manager's style means it has tended to lag a strong market rally, particularly when companies more sensitive to changes in the economic environment are performing well.
Italian Bank, Intesa Sanpaolo, is currently one of the fund's largest holdings. Sam Morse suggests this is not the type of company in which he would normally invest; however, he views it as more conservative than many other banks, with a better track record of holding up during times of crisis. The bank also went through a senior management change a couple of years ago, and they are focused on cost cutting. Banking reform in Italy could also act as a tailwind.
Our view on this fund
We view Sam Morse as a capable and experienced fund manager. While his benchmark-aware approach means the fund is unlikely to race ahead of its peers, the manager is naturally conservative meaning the fund has tended to hold up relatively well in unsettled markets. We also like his focus on quality companies, supported by dividend growth and we would expect the manager to deliver good returns over the long term.
That said, the European sector contains numerous high-quality managers with longer track records in running European portfolios. Sam Morse began managing funds in 1994, but his first 15 years were spent focused on UK equities. The fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.