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.
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 12 -
| Aug 13 -
| Aug 14 -
|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.