Funds that bet on the growth style have come out on top over the long term in Europe, research by Trustnet has found.
Based on three-year rolling returns, the vast majority of funds that persistently ranked in the first quartile of their peers over the past 10 years were mainly focused on growth, while value seems to have had the upper hand in the UK.
Below, we highlight which funds in the IA Europe Excluding UK and the IA Europe Including UK sectors with a 10-year track record maintained a first-quartile position for returns at least 70% of the rolling three-year periods since 2013.
Rolling three-year returns of BlackRock European Dynamic vs sector
Source: FE Analytics
The most consistent fund is BlackRock European Dynamic, an unconstrained strategy which kept its top-tier ranking 94.2% of the time, while spending the rest in the second quartile, never falling below it.
One of the key attractions of this fund according to Square Mile analysts is that it is not bound to a particular style of investing – manager Giles Rothbarth will shift the portfolio to take advantage of the opportunities that the market presents.
“As demonstrated by its successful track record thus far, we believe that the fund should be able to achieve its objectives over the longer term, but it might be better suited to investors with a longer-term time horizon,” they said.
It is the only fund in the list which doesn’t focus exclusively on growth and is closely followed by Comgest Growth Europe Opportunities (90.8%), as shown in the table below.
Source: FE Analytics
This quality-growth portfolio is co-managed by FE fundinfo Alpha Manager Franz Weis, who invests in stocks that may have a higher risk profile, shorter track records and better earnings than more established growth companies.
It has 35 holdings, half of which operate in the telecom, media & technology and healthcare sectors.
The managing team additionally includes Eva Fornadi and Denis Callioni, who also lead the Comgest Growth Europe Smaller Companies fund (which is found a few positions down the table).
The fund captures some of the team's earlier-stage ideas, typically those with a market capitalisation of €1bn to €10bn, Square Mile analysts explained.
“The team's edge is their company analysis, and as such, we would expect returns to be primarily driven by stock contribution, although sector and country allocation can also have an influence. We hold in high regard the quality of their research process, which they have followed through different market conditions and which helps them to identify attractive investment opportunities,” they said.
With JPM Europe Strategic Growth, we move on to the 80% section of the table. Co-manager and FE fundinfo Alpha Manager Ben Stapley focuses on high-quality investments with positive momentum through a bottom-up stock selection process.
Also generating returns from stock selection, Man GLG Continental European Growth is recommended by FE Investments analysts as a more aggressive European play.
“We like the concentration feature of the portfolio at 30 to 40 names, with the top 10 companies making up around 50% of the portfolio. This top-heavy weighting can lead to greater volatility if several of its companies fall at the same time, and as such the fund is a punchy way to invest in Europe,” they said.
Co-manager Rory Powe was praised for his “dedication to the bottom-up process”.
Jupiter European and Baillie Gifford European close the list.
Achieving a first-quartile performance 65% of the time in analysis, the value-focused MFS Meridian European Value fund was just below the threshold for inclusion.