I believe European equities are probably the best bet of all major markets at present. A large number of investment managers are more positive about this market than any of the others for several good reasons. European equities continue to trade at a discount to their US counterparts and have further scope to rerate. Ongoing merger and acquisition activity is also likely to support markets throughout Europe.
In Germany, the pace of economic growth is picking up, domestic demand is increasing and productivity improvements should also boost shareholder returns. Export demand is firm, despite the strength of the euro, particularly with rising orders from Asia.
I like the New Star European team which has recently been strengthened by the acquisition of the Tilney European growth fund, now called New Star European value, which will continue to be managed by top-performing manager Nicholas Sheridan.
Working with Richard Pease, director of European equities at New Star and manager of the New Star European growth fund, one of the sector’s top performers in the medium term, this team should continue to do very well.
Pease’s fund invests heavily in European banks, accounting for around 20 per cent of the fund, with the rest spread widely.
France is the country with the heaviest weighting, with around 17 per cent of the fund’s investments. Germany has 15 per cent of the fund’s assets, the Netherlands also 15 per cent and Switzerland 11 per cent.
Other European funds I particularly like are Neptune European opportunities, the two JO Hambro European funds, Artemis European and the Standard Life European equity growth fund.