Baring Europe Select - an exciting way to invest in Europe
Kate Marshall | Wed 30 May 2018
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- A different approach to investing in Europe
- We're encouraged by the experience of the manager and his team
- Company earnings are growing across the continent
Our View
Baring Europe Select is different to a lot of other funds investing in Europe. It invests in small and medium-sized companies, while most others focus on larger firms. We think this boosts the fund's growth potential, though it increases risk.
Nick Williams runs the fund. We recently met him for an update. We're pleased to hear he's sticking to the same investment process that he's used for many years. He's strict in the way he runs the fund and this has worked well over the long run, although this shouldn’t be seen as a guide to the future.
He has a good team of investors and analysts to help him. We think this gives them a better chance of finding the best investments in this wide area of the market. They can also keep on top of what's going on in more specialist areas of the market, such as technology.
We remain impressed by Nick Williams and his team, and we're positive about the fund's long-term prospects. It could help diversify the European part of an investment portfolio, or one focused on larger companies. The fund features on the Wealth 150+ list of our favourite funds.
Manager's outlook
Nick Williams is more optimistic than some investors. He says business confidence is picking up. For example, there are more businesses taking over other companies and this shows they're more positive about their future prospects. Company earnings growth has also improved and he thinks this will continue. This is a positive because growing earnings have tended to support share prices over the long run.
He thinks this will offset any negative impact to company profits from rising wages, and the European Central Bank’s removal of policies that have kept share prices high. These things could cause share prices to fall in the short term, but he doesn’t think they’ll derail the prospects of high-quality companies.
This is partly because smaller companies often carry out business in unique areas of the market. If their product or service meets a rapidly-growing need, they’ll be able to increase prices to offset the negative impact of things like rising wages.
Wirecard, the German electronic payments company, is a great example. It’s been one of the fund’s best performing investments recently. Profits have grown strongly and Nick Williams expects this to continue as it wins more business from competitors.
It’s a similar story for GN Store Nord, a new investment in the fund. It’s a Danish company that makes hearing aids, headsets and other audio devices. Nick Williams bought shares in the company at a good price, in his view, and thinks it now has a better range of products to help it grow.
Another new investment is Amer Sports, which is based in Finland. This sporting goods and clothing company owns brands such as Salomon and Wilson. Nick Williams is optimistic about the management's long-term plans to improve profits.
Performance
European smaller companies have generally performed well over the past year, though most global stock markets were volatile at the start of this year.
Baring Europe Select delivered a slightly lower return than the average fund in the European Smaller Companies sector over the past year. Long-term performance has been impressive. Over the past ten years the fund has grown 223.3%* compared with 169.0% for the sector, though past performance isn't a guide to the future.
Baring Europe Select - ten year performance
Past performance is not a guide to the future. Source: *Lipper IM to 30/04/2018.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Apr 2013 -
Apr 2014 |
Apr 2014 -
Apr 2015 |
Apr 2015 -
Apr 2016 |
Apr 2016 -
Apr 2017 |
Apr 2017 -
Apr 2018 | |
| Baring Europe Select | 20.8% | 10.1% | 8.3% | 33.8% | 10.4% |
| IA European Smaller Companies | 21.7% | 7.1% | 5.7% | 31.7% | 11.8% |
Past performance is not a guide to the future. Source: *Lipper IM to 30/04/2018.
Please read the Key Features/ Key Investor Information in addition to the information above.