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Fidelity takes long-term view on Europe

Fidelity International has added a retail share class called Europe long term growth to its institutional Europe ex UK fund which was launched in 1996.

As the name suggests, Europe long term growth has a longer-term focus, with stocks being held in the portfolio for at least three years, so turnover is low. It invests for growth through a portfolio of 40 to 100 continental European stocks.

The portfolio has a bias towards big and medium sized companies which have sustainable business models, plus attractive risk and reward characteristics.
Thomas Fraenkel-Thonet joined Fidelity in 1994 as a research analyst and became a fund manager in 1999. He runs around £1.5bn in retail and institutional European funds.

For this fund, he chooses innovative businesses within markets that have high barriers to entry so that it would not be easy for rival firms to compete in the same area. He looks for firms with a long-term competitive edge and will buy stocks irrespective of the short-term outlook. He does not try to time a recovery and is happy to buy stocks when they are out of favour.

Risks are monitored daily by the manager and monthly portfolio reviews take place with Fidelity’s Investment Risk Oversight Committee. The portfolio is assessed using quant screens and other issues such as performance and liquidity are discussed during quarterly reviews with Fidelity’s chief investment officer.

As a new share class rather than a new fund, Europe long term growth has a 13-year track record. This includes 10 years with Fraenkel-Thonet at the helm.

In common with its benchmark, the MSCI Europe ex UK index, the fund has performed better over a time horizon of at least five years compared with its performance over the last three years but has consistently outperformed the index since launch.

Economic growth in the region may be disappointing so the returns from this fund are likely to come mainly from the manager’s stockpicking skills.



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