January’s financial market turbulence turned into a veritable storm in the early days of February with extreme moves and volatility in all asset markets. Crude oil suffered its biggest two day plunge in seven years, bond yields collapsed and financial stocks led substantial falls in European equity markets. Although this partly reflects increasing investor uncertainty and anxieties over growth, oil and central bank policy, some speculative trades in far less liquid financial markets have amplified the volatility.
Despite those headwinds, it is not all gloom. In fact, there is enough evidence to suggest cyclical forces are still supportive with unemployment falling at its fastest pace since 2007, auto sales are recovering, credit growth improving and consumers’ major purchase intentions are close to their highest level since early 2001. Moreover, the latest PMIs and regional and industrial country survey data all remain at solid levels.
Morningstar analysts prefer to rate funds with a track record through a market cycle – new funds have not had time to prove the manager’s strategy works. But savvy investors should an eye on the market for potential future investment ideas.
New European Funds to Keep an Eye On
It is worth highlighting that many of the newcomers are very small in size, with four funds under $40 million. Investors should also be aware a one year time frame is a short period to assess fund performance.
SLI Continental European Equity Income is managed by Will James, who has run the UK-domiciled version of this fund, rated Bronze by Morningstar, since April 2009. James has been involved in developing this strategy since the start and has made good use of the resources available to him at Standard Life. All team members contribute actively to idea generation through their sector specialties. A common investment language is used throughout their analysis, with the goal being to identify non-consensus opportunities.
The Guinness European Equity Income fund is managed by Ian Mortimer and Matthew Page, who also manage the global equity income strategy at Guinness Asset Management. The managers run a concentrated portfolio of around 30 stocks and seek companies that are able to provide a sustainable dividend stream, with a focus on firms that have a history of delivering a high return on capital.
Old Mutual Europe ex UK Smaller Companies launched in late 2014 following the arrival of ex-Ignis fund manager, Ian Ormiston, at Old Mutual. Ormiston has over two decades’ experience in European equities and had spent seven years at Ignis running European equity money, specifically focusing on European smaller companies. The manager employs a unique approach and has stayed true to his style even through some tough market environments for small-caps. He looks for smaller companies with decent cash generation and balance sheets, and good earnings and dividend growth prospects.
