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Doorstep challenge

A Cofunds’ round table questions why IFAs are looking further afield rather than investing in markets closer to home.

Some tasks are easier to perform than others. Last week, I chaired one of Cofunds’ regular round-table discussions. This is familiar territory to me but seldom have I had to work as hard as I did on this occasion. It wasn’t that the participants were not erudite and interesting. Rather, it was the subject matter. It seems that investing in Europe is not high on most advisers’ agenda.

As the morning developed, I started to wonder why this might be the case. In the end, I was able to deliver my own answer.

It so happens that only a few weeks ago I had written on the subject of funds listed in the IMA’s Europe ex UK sector in a sister publication to this esteemed journal. The reason I picked Europe was because I had last written about this sector in 2006.

If I failed to look at this most intriguing of areas in nearly four years, who can blame IFAs for ignoring the markets on their doorstep?

Cofunds’ Michelle Woodburn confirmed that interest on the platform for European funds is not great. Yet, as I know from the research I conducted for my recent article, there are some impressive performance numbers around.

Stuart Fowler, who set up No Monkey Business as a wealth management boutique a few years ago, pointed out that most managers operate as if Europe is a single, homogeneous unit, which it most clearly is not.

With Asia and emerging markets providing all the headline stories, should we be surprised if Europe is ignored?

Cazenove head of multimanagement Marcus Brookes agreed but said it is possible to find managers prepared to take a stock – picking approach, rather than being closet index trackers, such as Argonaut’s Olly Russ, also present at the discussion.

It was also interesting to learn how markets have converged in valuation terms. Peter Toogood of OBSR had all the numbers but was able to point to the fact that individual markets display wide variations due, no doubt, to the makeup of their economies.

In the end, it seems currency fluctuations are the most likely component in determining superior or inferior returns.

I promised myself I would look at how much I have committed to Europe in my own portfolio – it says a great deal the fact I don’t know.

For me, Europe has been a place to consider rather than act on and this approach seems pretty universal if Cofunds’ statistics are any guide. Russia has certainly been on my radar screen in the past and I could not help but ask the fifth panel member, Stephen Macklow-Smith of JP Morgan, how Oleg Biryulyov has maintained his record. He is, I was assured, a natural stockpicker.

At the very least, Europe delivers a diversification opportunity but with Asia and emerging markets providing all the headline stories, should we be surprised if it is ignored?

Otherwise, last week saw shares continue to build on the recovery, with the Bank of England leaving both rates and quantitative easing on hold. I feel this is the calm before a storm, though whether the weather will be politically or economically stimulated is anyone’s guess.

Brian Tora (brian.tora@ is principal of the Tora Partnership


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