European equities may not be as popular as their North American peers, but they are proving to be a more fertile ground for seasoned managers. While no veteran manager in the IA North America sector has been able to make top-quartile performance in recent years, four have achieved this feat across the IA Europe Excluding UK and IA Europe Including UK sectors.
Below, Trustnet researched the European funds that have been managed by the same person since 2004 or earlier and have produced top-quartile returns over the past three years, showing those who have been through it all and continue to make top returns.
One of the two funds in the IA Europe Excluding UK sector reflecting our criteria is Artemis SmartGARP European Equity, which has been managed by Philip Wolstencroft and Peter Saacke since 2001 and 2002 respectively. The latter is leaving the firm at the end of June however to become a maths teacher.
The fund’s investment process is based on Artemis’s proprietary tool “SmartGARP”, which aims to help the managers spot reasonably valued companies with superior fundamental growth.
As such, companies matching the market capitalisation and liquidity requirements are assessed against eight factors, including macroeconomics, investor sentiment, growth, valuation, estimate revisions, momentum, accruals and environmental, social and governance (ESG) factors.
Each company is then assigned an overall score, with 100 being the highest possible mark. However, only those scoring above 90 will be considered for inclusion in the fund.
The result is that none of the benchmark's heavyweights are among the fund’s top 10 holdings. Moreover, GSK is the only 'Granolas' stock in the fund, also constituting an off-benchmark position as it is listed in the UK.
While the fund has shined in recent years, long-term performance has been strong as well, with the fund also sitting in the sector’s first quartile over five years and in the second quartile over the past decade. Yet, this has come at the price of a higher volatility than its peers.
Performance of funds over 3yrs (to last month end) vs sector and benchmark
Source: FE Analytics
The second fund in the IA Europe Excluding UK matching our requirements is Waverton European Capital Growth, which has been steered by FE fundinfo Alpha Managers Charles Glasse and Chris Garsten since 2001.
They look for ‘wealth-creating’ companies, operating in favourable business environments and trading at attractive valuations.
The fund is concentrated, with the top 30 holdings accounting for 98% of the portfolio according to FE Analytics. The managers do not bet the house either on the Granolas as it just holds three of them (out of 11): Nestle, Novartis and Sanofi.
Long-term performance has been good as well, as Waverton European Capital Growth sits in the top quartile of the sector over five and 10 years.
It has also been one of the least volatile funds in the IA Europe Excluding UK sector both in recent years and over the past decade.
Two veteran managers in the IA Europe Including UK sector also outpaced their competitors over the past three years.
The first one is Laurent Nguyen, who has been at the helm of Pictet Quest Europe Sustainable Equities since 2002 and also delivered top-quartile performance over 10 and five years.
ESG factors are a core element of the strategy, with the manager seeking to invest in companies with low sustainability risks and to avoid those involved in activities that negatively impact society or the environment.
Unlike the two previous funds, Pictet Quest Europe Sustainable Equities takes a bigger punt on the Granolas, with Novartis, Novo Nordisk, L’Oreal and GSK all appearing in the top 10 holdings.
Both short- and long-term performance have not come at the expense of higher risk, as the fund has consistently been one of the least volatile in the sector. It also boasts one of the highest Sharpe ratio, indicating investors have been fairly rewarded for the amount of risk taken.
Performance of funds over 3yrs (to last month end) vs sector and benchmark
Source: FE Analytics
Finally, Michael Barakos is another European veteran manager to have delivered top quartile returns over the past three years.
He has been managing JPM Europe Strategic Value since 2004 and was joined by Ian Butler in 2014 and Thomas Buckingham in 2017. Together, they look for attractively valued sound companies.
As such, the fund is currently overweight insurance, bank and automobiles & component sectors, with Mercedes-Benz being the latest addition to the portfolio. The decision was made as a result of the German car company’s announcement of a new share buyback.
Conversely, JPM Europe Strategic Value recently sold UK bank NatWest due to disappointing third-quarter results and financial year 2023 guidance last year.
While short-term performance has been good, the fund has suffered over the past decade, as the value-style of investment has been generally out of favour in that period. As such, it sits in the bottom quartile over 10 years and in the third over five years.
The fund has also been more volatile than its sector peers, both over the short- and long-term.