Baring Europe Select - a niche opportunity not to be overlooked

Kate Marshall | Thu 23 March 2017

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• This fund’s focus on smaller businesses differentiates it from other European funds
• Nick Williams adheres to a disciplined investment approach and focuses on companies with earnings growth potential
• We maintain high conviction in this experienced manager – the fund features on the Wealth 150+

Our view

Most investors look to the UK to gain exposure to medium-sized and higher-risk smaller companies. Yet this means missing out on an array of opportunities overseas; Europe included. The Baring Europe Select Fund offers a way to access this often overlooked area of the market and we feel it offers something different to the majority of European funds that focus on larger businesses.

We recently met Nick Williams, the fund’s manager, for an update. We are encouraged to hear he remains steadfast in his disciplined investment approach, which he has applied since taking over the fund’s management in January 2005. His strategy has yielded strong long-term returns and our analysis shows the manager has an excellent track record in picking stocks that perform well regardless of which sector or country they are located. Please remember past performance is not a guide to future performance.

We retain our positive outlook for the fund, which features on the Wealth 150+ list of our favourite funds at the lowest ongoing charge. Please note the Vantage platform fee of up to 0.45% p.a. also applies.

The fund also features in three of our HL Multi-Manager portfolios: the European, Balanced Managed, and Special Situations funds, which are run by our sister company HL Fund Managers Ltd. Our recent meeting increased our conviction in the manager and we subsequently took the opportunity to increase our investment in the fund in all three portfolios.

Performance summary

The shares of European smaller companies have performed strongly over the past year. Sterling weakness against the euro provided a significant boost to returns for UK-based investors. The Baring Europe Select Fund delivered an attractive return of 25.1%* over the same period, although this was behind the return of the broader market. Past performance should not be seen as an indicator of future returns.

Past performance is not a guide to the future. Source: *Lipper IM to 28/02/2017

The fund’s lack of exposure to some of the better-performing and more economically-sensitive areas of the market, such as financials and other commodity-related industries, weighed on returns. Companies in these sectors have tended to lack the earnings growth potential the manager seeks. He has instead continued to focus on companies he believes have greater growth prospects, stronger balance sheets, and more sustainable track records of profitability.

Over the longer term the approach has proven a success. The manager’s focus on high-quality companies means the fund has tended to lag a rapidly-rising market, but hold up relatively well in weaker markets, which puts the fund on the front foot once markets rise again.

Portfolio activity

New investments include Italian hearing aid maker Amplifon, which continues to establish a more dominant position in the market it operates. Shares in Norwegian life insurer Storebrand were also added to the portfolio. The company has a high market share and is restructuring its business, which is already yielding positive results, according to Nick Williams.

The manager continues to sell and take profits from investments that have reached their target share prices. Recent examples include transport business Faiveley, biotech firm Bachem and food testing company Eurofins.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.