Schroder European Alpha Income, FP CRUX European Special Situations and Threadneedle European were among the funds to benefit most from improving sentiment towards European equities, according to the data from FE Trustnet.
Having struggled for many years, European equities have had a resurgence in recent months, with the asset class outperforming many of its developed market peers.
Indeed, as the below shows, the MSCI Europe ex UK index has returned more than double the broader MSCI World index and is almost four times higher than the S&P 500 during the first half of 2016.
Performance of indices in H1 2016
Source: FE Analytics
As such, investors have been keen to invest in the region, with European equities the second most bought asset class in May and June behind global equities, according to data from the Investment Association.
Below, FE Trustnet looks at the five funds in the IA Europe ex UK sector most benefitting from this change in sentiment towards European equities.
Schroder European Alpha Income
The fund that gained the most inflows during the first half of 2017 was Schroder European Alpha Income run by James Sym.
The three crown-rated fund, which was launched in 2012, has been a consistently strong performer in recent years and sits in the top quartile of the sector over one, three and five years.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
It had a more difficult start to the year, undeforming both the sector average and FTSE World Europe ex UK benchmark in the first half of the year, though it remains a strong performer over one year.
The fund saw £447m in net inflows during the first half of the year and a performance benefit of £86m. Overall therefore, the portfolio increased its assets under management (AUM) from £555m to £1.1bn in the six months to the end of June.
While this is primarily an income fund, the manager aims to deliver strong outperformance against the index over time first and foremost.
As such, although it has a premium to market yield objective, this is very much secondary and over the manager's tenure it has not consistently met this yield target.
In its latest analyst note, Square Mile Research said: “The name of the fund contains the word ‘income’ but we believe that this is truly a total return offering and that investors should be aware that the manager does not explicitly run the fund for income generation.
“The key attraction here is the pragmatic investment approach that underpins the strategy.”
Sym looks to build a portfolio of typically 40 predominantly large- and mid-cap stocks that will perform differently at various times of the economic and business cycle.
FP CRUX European Special Situations
The next most bought fund was the five crown-rated FP CRUX European Special Situations run by FE Alpha Manager Richard Pease since 2009 with co-manager James Milne joining him in 2015.
The fund has been a top quartile performer over the longer term, returning 132.47 per cent over five years, though it has lagged the benchmark and sector over the last 12 months.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
The managers focuses on good quality businesses that are cash generative and possess an edge that their competitors would find difficult to replicate or better.
Square Mile noted: “All this taken together does mean that there will be periods when the strategy may struggle such as when the markets are chasing certain themes, for example rewarding more cyclically sensitive companies, but over a cycle we believe the fund should continue to be a standout performer.”
The fund saw net inflows of £224.3m in the first half of this year, while it also benefited from its recent performance which added £199.8m.
As such the portfolio has risen from £1.3bn at the start of the year to its current level of £1.7bn.
Next up is Paul Doyle’s four crown-rated Threadneedle European, which saw net inflows of £205m during the first half of 2017.
With an additional £231m boost from investment performance, the fund has risen from £742m in AUM to almost £1.2bn.
Doyle took over the fund in 2014 taking over from Nick Davis who had managed the fund previously. It had a difficult year last year and was a bottom quartile performer having been a top quartile performer in 2015.
So far this year, the fund has returned 16.12 per cent, slightly behind both the IA Europe ex UK sector and FTSE World Europe ex UK benchmark.
Overall, since the manager took over, the fund has returned 40.08 per cent to the end of June, 1.41 and 3.62 percentage points ahead of the sector and benchmark respectively.
The portfolio is currently 8 percentage points overweight in industrials while slightly underweight financials and consumer goods companies.
It has 59 holdings with the top 10 making up 27.2 per cent of the overall portfolio. Roche, Ryanair and Unilever are its top three holdings.
Invesco Perpetual European Equity
The fourth most bought active fund is Jeffrey Taylor’s Invesco Perpetual European Equity fund, which also appears on the FE Approved list.
The portfolio has a value style bias to it which has been popular with investors with the style outperforming growth counterparts in Europe over the last year.
The fund has been a top quartile performer over one, three, five and 10 years, making it a popular choice for investors looking towards those managers with a proven long-term track record.
Indeed, since Taylor took over the fund in 2001, it has returned 230.81 per cent, as the below shows, significantly ahead of the sector and MSCI Europe ex UK index.
Performance of fund vs sector and index since manager start
Source: FE Analytics
The fund saw £204.5m in net inflows in the first half of the year. Adding performance uplift of £229m the AUM has risen from £1.9bn to £2.4bn over the period.
However, despite the outperformance, it should be noted that Taylor actively buys into areas of the market that are out of favour, which may fall further in price and lead the fund to underperform before hopefully rebounding over the longer-term.
As such, FE Invest said it should be used as “a very long-term European holding or a diversifier to a broader ‘core’ European equities exposure”.
Vanguard FTSE Developed Europe ex UK Equity Index
The final fund on our list is the five crown-rated passive vehicle Vanguard FTSE Developed Europe ex UK Equity Index.
While European equities have had a strong year-to-date, many investors remain cautious having had their fingers burned in previous years by a market that has threatened to improve but not managed to fulfil such promise.
As such, a more liquid and easily traded way to allocate into and out of Europe may be through a tracker, with the Vanguard FTSE Developed Europe ex UK Equity Index the main beneficiary.
The fund saw net inflows of £158m in the first half of this year with its AUM rising from £1bn to £1.3bn when performance uplift is also taken into account.
The FTSE Developed Europe ex UK index, which the fund tracks, is made up of the shares of companies listed on the stock exchanges of Europe's Developed markets.
As such it is highly weighted to France, Germany and Switzerland with no exposure to the developing countries of Eastern Europe.
The fund has returned 104 per cent over five years, 4.22 percentage points below the index. It has a tracking error over this period of 1.06.