JO Hambro Continental European - a review of the year
Kate Marshall | Tue 27 November 2018
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- Paul Wild combines his views on the economy with company analysis to run this fund
- Investments in the financials sector held back performance over the summer
- The fund’s performed better more recently though
Our view
We view Paul Wild as an experienced manager with a sensible approach to investing in European companies.
He does something a little different to some other managers in the European sector. He combines his views on the economy with analysis of individual companies to work out what areas to invest in. It’s an approach that’s worked well over the long run. But it’s not easy getting the bigger economic calls right, so it won’t necessarily work all the time.
JO Hambro Continental European invests in a broad range of sectors, which doesn’t differ too much from the broader European market. This means performance could be similar to the market in the shorter term, but the fund’s performed better than the market over the long run. As always, past performance isn’t a guide to future returns.
How’s the fund performed this year?
The fund’s performed slightly better than the broad European stock market so far this year. It’s performed well in recent months, but it had a tougher time over the summer.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Oct 13 -
Oct 14 |
Oct 14 -
Oct 15 |
Oct 15 -
Oct 16 |
Oct 16 -
Oct 17 |
Oct 17 -
Oct 18 |
|
| JOHCM Continental European | 0.1% | 10.6% | 20.7% | 15.3% | -5.3% |
| FTSE World Europe ex UK | -0.8% | 5.2% | 19.7% | 19.9% | -5.6% |
Past performance is not a guide to the future. Source: Lipper IM to 31/10/2018
At the start of the year Paul Wild thought the European Central Bank would raise interest rates quicker than other people expected. So he added to investments in financial companies because they often benefit from higher rates. Banks make more money from the cash deposits they hold for customers when rates are higher, for example.
But markets were unsettled in June when an attempt to form a coalition government in Italy fell through. Turkey’s mounting debt problems and a sharp decline in its currency also didn’t help. The ECB put the brakes on rising interest rates, and financial companies suffered.
This hurt the fund’s performance and Paul Wild reduced its investments in the sector. 22% of the fund is still invested in financials though. He thinks some companies in the sector offer good value and have the potential for more growth than companies in other sectors that have already performed well in recent years. This includes some banks, as well as insurers like AXA.
At the same time he sold some investments in companies that rely on large, one-off purchases from consumers. This includes the auto and luxury goods sectors, such as LVMH, which owns brands including Louis Vuitton and Veuve Cliquot champagne.
He also added to consumer staples companies that tend to sell more everyday items, like food and toiletries, and large healthcare firms including Sanofi and Novartis.
More recently investments in healthcare and financials have helped the fund. So has exposure to energy companies, which have benefited from a higher oil price this year. This includes Austrian oil company OMV.
Broadly speaking company earnings in Europe have picked up over the past year, which could eventually be good news for share prices. Economic growth also looks reasonable and unemployment has fallen this year. There’s still a lot of political uncertainty though, so periods of volatility shouldn’t be overlooked.
Please note this fund has a performance fee. You can find out more details in the fund’s Key Investor Information Document. This is an offshore fund, so investors won’t normally be covered by the Financial Services Compensation Scheme.