TM CRUX European Special Situations – invest with a true stock picker

• Richard Pease is one of our highest-conviction fund managers for investing in Europe
• He looks for "special" companies he thinks offer something unique from their competition
• Many of these carry out business globally, so they don't only rely on Europe for their success

Our view

Richard Pease is a fund manager we've rated highly for many years. He's invested in European companies for more than three decades and built impressive knowledge of the market over this time. He's also unwavering in his focus on the prospects for individual companies, instead of wider economic events that are less likely to impact share prices over the long run.

Pease isn't a one-man band when it comes to running TM CRUX European Special Situations though. He has a team of investors around him, including co-manager James Milne, to help look for what they think are the best investment opportunities. We think each member of the team brings different skill sets to the fund, which should also lead to a healthy dose of challenge and debate.

We think this fund provides exposure to one of the best stock pickers in the industry and is an excellent choice for investing in Europe. It's currently on the Wealth 50 list of our analysts' preferred funds across the major sectors.

On the hunt for special companies

Pease has an excellent long-term track record. His funds have performed much better than the broader European stock market over the length of his career, and over the past decade this fund has grown 191.6%* compared with 124.8% for the FTSE World Europe ex UK Index.

He's delivered an attractive return for investors over the past year too, with the fund performing broadly in line with the 15.0% growth of the market. We think this is a good result for the fund – typically it hasn’t outperformed in a rapidly rising market, though it has tended to hold up better in weaker markets. Please remember past performance isn't a guide to future returns.

Past performance is not a guide to the future. Source: *Lipper IM to 31/01/2020

Pease often invests in companies that do something unique that competitors struggle to replicate. This means other rival companies sometimes make a bid to take them over, benefiting the share price. This happened to several companies in the fund last year, including Cramo and Ramirent, which are both construction and equipment rental businesses.

That said, the fund missed out on gains made elsewhere. Some of Europe's biggest companies have performed well in recent years, including some consumer businesses investors think will continue to deliver stable returns, even in adverse market conditions. Pease has tended to avoid these companies because he doesn’t think they offer enough profit growth potential or their share prices offer enough value.

The fund still has some exposure to the sector, but the manager focuses on companies he thinks offer good value, have long-term staying power, and have cut costs to boost profits, such as food business Nestlé.

Pease is also a fan of businesses that make money across the globe, not only within Europe. On average, companies held in the fund make 53% of their earnings in Europe – the remainder is made overseas, including from North America and the emerging markets. This means they could benefit from spending in faster-growing regions of the world and don't just rely on Europe's domestic economy for their success.

The manager also uses his flexibility to invest part of the fund in companies based outside Europe, providing they offer something special that can't be found within the region. The technology sector is a good example. It currently makes up 7.1% of the European market, compared with 17.1% for the broader global market, where there is a more diverse range of opportunities. To take advantage, Pease currently invests in companies such as US technology giant Alphabet (parent company of Google).

The manager invests in companies of all sizes, including large, medium-sized and higher-risk smaller companies, and invests in a fairly small number of companies, which also increases risk as each one can have a meaningful impact on performance.

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