Europe is more than just a single continent. It’s politically, economically and culturally diverse. From Norway and Sweden in Northern Europe to Spain and Italy in the South, each area has its own struggles and success stories. We think this diversity offers opportunities for investors.
Europe’s had its fair share of problems in recent years, but there are reasons to be positive. It's home to lots of first-class businesses that have made money from operations across the globe. This means they have the chance to be successful, no matter what’s going on in the economic or political background although there are no guarantees.
There are also lots of quality fund managers investing in Europe with great track records. Most focus on larger companies. Some invest in small and medium-sized companies. These offer greater growth potential, but they’re higher risk than larger firms.
Most European funds aim to grow your investment, but there’s an increasing number of funds that focus on dividend-paying companies in order to pay investors a regular income.
Europe has overcome a lot of problems in recent years. But it’s not out of the woods just yet. Debt levels for both governments and individuals are high. In the not too distant past some Eurozone banks have been on the brink of failing, and some countries have been close to or have slipped into recession.
But we think investors should try to ignore economic news and focus on the prospects for individual companies. In the short term, changes in the economy and investor sentiment can affect how the stock market performs. But over the long run share prices are more driven by how successfully businesses can grow their earnings. Trying to time markets or second guess the effect of economic news has had little impact on investment success over the long term.
We think most long-term growth portfolios should have some exposure to Europe. It means investing in some of the world’s most successful companies. Some of these carry out business worldwide, so they provide exposure to global markets, including faster-growing economies.
There are a number of successful managers in this sector and the Wealth Shortlist features those chosen by our analysts for their long-term performance potential.
Remember all investments can fall as well as rise in value and you may not get back what you invest.
Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.
Our Wealth Shortlist features a number of funds from this sector, selected by our analysts for their long-term performance potential. The Shortlist is designed to help investors build and maintain diversified portfolios. To use the Shortlist to build your portfolio or review your existing portfolio, you should be comfortable deciding if a fund fits your investment goals and attitude to risk. For investors who don't feel comfortable building and maintaining their own portfolio we offer ready-made solutions, which are aligned to broad investment objectives. For those who want extra help, you can also ask us for financial advice.
The fund reviews below are provided for your interest but are not a guide to how you should invest. For more information, please refer to the Key Investor Information for the specific fund. Remember all investments and the income they produce can fall as well as rise in value so you could get back less than you invest. Past performance is not a guide to the future.
There is a tiered charge to hold funds on the HL platform. It is a maximum of 0.45% a year - view our charges. These fund ideas are reviewed and updated periodically to ensure they match our latest views.
Wealth Shortlist fund reviews
This fund aims to boost long-term growth by focusing on higher risk small and medium-sized European companies. This makes it different to most other European funds that focus on larger firms. It could therefore diversify the European part of an investment portfolio, or a broader global portfolio focused on growth.
There aren’t many fund managers with such a long and successful track record of investing in this less familiar part of the European stock market. Nick Williams is one of the few. He also has the support of co-managers Rosie Simmonds, Colin Riddles and William Cuss.
Williams has used the same disciplined investment process for many years. He and his team follow a GARP (Growth at a Reasonable Price) philosophy. This means they look for companies that grow their earnings consistently, but whose shares can be bought at a lower price than the earnings potential suggests they should be.
The fund focuses on investing in smaller European companies and despite periods where smaller companies have underperformed their larger peers, Williams continues to stick to his investment proofs. We also like the strength of his stock picking ability over the long term as he’s added value no matter what size of company he invests in, and regardless of what sector they're in or country they're based.
This fund mainly invests in big firms in larger European economies, such as Switzerland, France, Germany and the Netherlands. We think it could be a good choice for exposure to Europe within a global investment portfolio or sit alongside other European funds using different investment styles. The fund invests in a fairly small number of companies and this means each one could have a big impact on performance, though this approach increases risk.
Lead manager Benjamin Moore searches for high-quality companies he believes offer sustainable returns and strong growth potential over the long run. These businesses typically possess unique qualities and a competitive advantage that others struggle to replicate.
A focus on companies that could deliver more sustainable returns has seen the fund hold up better than the average European fund in weaker markets, though it hasn’t tended to rise as quickly in positive markets. Please remember past performance isn't a guide to future returns.
One thing we like about Moore is his discipline to stick to process. Even though his ‘growth’ style of investing fell out of favour at times last year, he continued to invest in his favoured growth companies, at prices he deemed more attractive. In keeping with process, the fund invests less in some of the lowlier valued and more economically sensitive areas of the market, such as energy and banks. So, we’d expect the fund to struggle in an environment where ‘value’ stocks surge ahead.
The fund aims to provide investors with an attractive income alongside growth in their investment. The managers mainly invest in larger, more established European businesses, but have the flexibility to invest in higher-risk small and medium-sized businesses as well. We think the fund could work well in an investment portfolio focused on income, or provide diversification to European or other global funds focused on growth.
Lead manager Andreas Zoellinger and co-manager Brian Hall, focus on delivering a growing income, alongside capital growth over the long term. They want to achieve this while experiencing less volatility than peers in the European sector, providing some resilience in tough markets. To do this, they focus on a blended balance of quality, income, and growth opportunities.
This focus results in the fund being split into three buckets - high yield, steady dividend growth and structural growth. At times the fund can be quite concentrated, which means each investment could have a big impact on performance, which increases risk.
They also have the flexibility to invest in both ‘growth’ and ‘value’ stocks, but their approach is quality orientated. They balance quality dividend-paying companies which have the potential for dividend growth over time, with companies that pay a higher income now, but perhaps have less potential for growth. Some of these companies may be in more economically sensitive sectors.
This fund aims to track the performance of the broader European stock market, as measured by the FTSE World Europe ex UK Index. It's currently made up of around 500 companies, focused towards sectors such as financials, consumer goods, healthcare, and industrial firms.
While these companies are based in European countries, many of the market's largest firms sell their products and services across the globe, so they're not solely reliant on their domestic economies to be successful.
The fund invests across Europe, including Switzerland, France, Germany, Sweden, Spain and Italy. We think it’s a good option for a low-cost, convenient way to access companies across the continent. It could also be used to diversify a long-term, global investment portfolio.
The fund aims to deliver an income greater than that of the MSCI Europe ex UK index. Alongside an income, the managers also want to grow investors’ money over time, with less ups and downs along the way.
While lead manager Nick Davis invests mostly in larger European companies, he is different to a lot of other European managers. He focuses on European companies that are considered undervalued but have the potential to bounce back. Many other European funds focus on companies with high-growth expectations, a style known as growth investing.
So, we think it could provide some diversification to European growth funds as well as other global funds focused on growth. It could also work alongside an investment portfolio focused on income.
Davis scours the continent for companies he thinks are undervalued. But he doesn’t invest in companies simply because they are cheap, they must have the potential to bounce back. Given this focus, he wants to see companies tick a few boxes – at least a 10% annual total shareholder return, a minimum yield of 2.5% with potential to grow over time, tried and tested management and strong balance sheets.
As a result, Davis breaks the portfolio down into three main buckets - Growth & Income, Balanced and High Yielders. The fund is generally equally split across these buckets and is made up of between 25-50 companies. The fund can be quite concentrated, which means each investment could have a big impact on performance, which increases risk. Davis has the flexibility to use derivatives which can magnify any gains or losses and increases risk.
Please note the fund's charges can be taken from capital rather than income. This increases the yield but reduces the potential for capital growth.
Latest news on this sector
Josef Licsauer | 23 June 2023
What’s next for interest rates in Europe, which stock markets have performed best and is now the time to invest in European shares? We take a closer look. Read article.
23 June 2023 | 7 min read
Please note the research updates are not personal recommendations to trade. If you are unsure of the suitability of an investment for your circumstances please seek advice. Remember all investments can fall as well as rise in value so investors could get back less than they invest.