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JOHCM Continental European Fund research update

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.

Paul Wild, manager of the JO Hambro Continental European Fund, is optimistic in his outlook for Europe and its stock markets for the remainder of 2015. In his view the market is yet to fully appreciate the benefits of a weaker euro and the precipitous collapse in the oil price. Once recognised, the share prices of companies positioned to benefit could rise in value. Exporters, for example, could benefit from a depreciating currency as it makes exports cheaper for foreign buyers.

Earlier this year the European Central Bank raised its economic growth forecast to 1.5% for 2015, which could further boost investor and consumer confidence. Meanwhile, the average dividend yield of the wider European market is currently 3.01%, although this will fluctuate over time. This could attract investors, particularly income-seekers, and could help keep share prices buoyant.

The risks, however, should not be forgotten. Many investors fear Greece could still leave the Eurozone, with tensions mounting between its government and the country's creditors. Paul Wild believes a withdrawal would cause some volatility, but he expects it would be fairly short-lived. In his view, investors are likely to use any market weakness as a buying opportunity; stopping share prices falling too far.

In terms of the fund's current positioning, the manager has been targeting companies that could benefit from a weaker euro, including exporters. At present he favours sectors such as car manufacturers. Earlier this year he purchased Fiat Chrysler, while Daimler is also held in the portfolio. These companies are benefiting from strong global sales, while much of their production, and therefore their costs, is also rooted in Europe.

Elsewhere, the manager is increasingly finding value in some of the more domestically-focused sectors such as banks. Exposure has recently been increased and a new position in Deutsche Bank has been added to the portfolio.

In recent years the fund's exposure to pharmaceuticals firms has contributed significantly to performance. Many businesses have benefited from restructuring and cost-cutting measures, whilst a slew of new drugs have boosted sales. Paul Wild has, however, been reducing exposure to the sector. He believes valuations are considerably fuller, restricting the potential for future gains.

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Our view on this fund

Over the past ten years, the fund has delivered an impressive return of 186.2%, compared with 138.3%* for the MSCI Europe ex UK Index and 129.1% for the IA Europe ex UK sector. Although please remember past performance is not a guide to future returns.

Annual percentage growth
May 10 -
May 11
May 11 -
May 12
May 12 -
May 13
May 13 -
May 14
May 14 -
May 15
JO Hambro Continental European 19.6% -17.9% 29.8% 19.6% 10.6%
IA Europe ex UK 17.8% -16.9% 26.1% 14.4% 8.2%
MSCI Europe ex UK 22.2% -19.9% 28.3% 15.2% 8.8%

Past performance is not a guide to future returns. Source: Lipper IM. *Figures to 01/05/2015.

Our analysis suggests the manager has added value over the long term through his strong stock selection and sector positioning. We remain confident that Paul Wild's disciplined investment approach, taking into account the prevailing economic and market conditions, will aid performance over the long term. The fund remains part of the Wealth 150 list of our favourite funds across the major sectors.

Please note the fund carries a performance fee, details of which can be found in the fund's key investor information document. As the fund is an offshore fund investors are not normally entitled to compensation through the UK Financial Services Compensation Scheme.

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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