Emma Wall: Hello and welcome to the Morningstar series, Why Should I Invest With You? I'm Emma Wall, and here with me today is Ollie Beckett, Manager of the TR European Growth Trust (TRG).
Hello, Ollie.
Ollie Beckett: Hi. Nice to be here.
Wall: So I thought, we'd start with the macro outlook for Europe. Very recent news suggests that there is corruption within the EU. Over the last couple of years, things have improved significant, but now and again, we do get these negative new stories out of Europe. What's really going on?
Beckett: Simplistically, things are getting better. Not as bad as they were maybe. So, I mean if you look at the recent economic data in January, which slightly got lost because of the Chinese and U.S. data, all of Europe is improving. Even France, if you like, is very poor English, but is getting less bad.
Wall: You invest in small and mid-cap stocks within the trust, which would suggest you would perhaps be more domestically focused. How much does this macro noise affect your investments?
Beckett: It's creating volatility. I mean in the last couple of years, equity markets have been very strong, particularly in the small and mid-cap space, and a lot of that’s being sentiment-driven either Eurozone isn’t collapsing. There is no fire. You know, Europe is not on fire, for example. So now people are looking for actually fundamental growth and they want proof and we have been lacking that proof. So, there has been a bit of volatility recently on the whole sort of emerging markets and currency problems. But essentially, as I say, Europe is getting better and European smaller companies are very leveraged to that improvement in GDP.
Wall: This proof that you talk of, what are we looking for?
Beckett: I think people want to see on an earnings level from companies. Again, we haven’t really had those upgrades. Expectations have continually been downgraded. So now, we're actually looking for evidence of earnings growth from specific companies across Europe.
Wall: So as an investor you are more concerned about what's going on, on those companies’ balance books, more than what's going on in the European macro situation?
Beckett: I can't ignore the macro situation. That would be naive. But as I say, actually the macro situation is improving. It was desperate two or three years ago. But things are getting better.
Wall: What are the concerns in investing in Europe at the moment? What are the hurdles perhaps that you have to overcome?
Beckett: Well, I mean the concerns probably are on a sort of global macro level. You know China doesn’t implode or that the U.S. keeps recovering. I think there are signs that it's positive. Then we will – I am sure, we'll have some sort of political noise, shenanigans. I mean we're going to go into euro elections and if we have Le Pen doing well in France, so you keep doing well in the U.K., that’s clearly going to cause a few consternations.
Wall: But it's just about perhaps accepting there will be volatility as investor and that’s the price you pay for growth?
Beckett: There will be volatility because I say, we've had a very good run. But what I would say is, historically, if GDP expands, you are very leveraged to it in the Europe small and mid-cap space. So, I think the direction is still upwards.
Wall: Ollie, thank you very much.
Beckett: Thank you.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
