A tough year for FP Argonaut European Alpha
Kate Marshall | Wed 20 March 2019
The links in this article will take you to Hargreaves Lansdown’s main website for more information. Please be aware that if you wish to join any of the benefits in your company Plan you must return to this website to apply.
- Barry Norris tries to find companies with earnings growth potential missed by others
- It's been a tough year for the fund and performance has been weak
- Investments in some commodity-related companies held back returns
Our view
Barry Norris, manager of FP Argonaut European Alpha, has lots of experience investing in European companies. He's been doing it since 2002 and over this time he's built plenty of knowledge about the European stock market and economy.
The manager's shown an ability to invest in companies that go on to perform better than the broader market in the past. But this hasn't been the case for several years and the fund's performance has been poor.
As a result we removed the fund from the Wealth 50 a year ago. So far it was the right call and we're not going to add it back to the list. But we'll keep an eye on the fund to see if there's any improvement in performance. We currently have more conviction in other managers in the Europe sector.
Performance update
It's been a tough year for FP Argonaut European Alpha. It's fallen 15.8%* compared with a loss of 3.3% for the broader European market, and 6.4% for the average fund in the Europe sector. Past performance isn’t a guide to the future though.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Feb 14 -
Feb 15 |
Feb 15 -
Feb 16 |
Feb 16 -
Feb 17 |
Feb 17 -
Feb 18 |
Feb 18 -
Feb 19 |
|
| FP Argonaut European Alpha | 1.5% | 3.0% | 7.1% | 15.4% | -15.8% |
| FTSE World Europe ex UK | 5.2% | -5.2% | 27.3% | 12.7% | -3.3% |
| IA Europe ex UK | 3.6% | -1.4% | 23.4% | 13.8% | -6.4% |
Past performance is not a guide to the future. Source: Lipper IM *to 28/02/2018
October 2018 was a particularly bad month. Commodity prices fell sharply and this hurt a number of commodity-related companies in the fund.
Spectrum and TGS, which provide seismic surveys and other data to the oil & gas industry, were hit when the oil price collapsed. Shares in Elkem, which sells silicone-based products, also fell when economic growth in China, one of its key customers, slowed.
Barry Norris reduced some of the fund's exposure to these companies, which helped later in the year. But it had already taken a lot of pain by that point.
Some other investments performed well. Health and hygiene company Essity, which buys a lot of materials to make its products, actually benefited from the commodity price falls. And according to Norris it's one of the fastest-growing consumer staples companies in Europe. It could also benefit from growing demand for its products in specialist areas, like incontinence.
What next?
Barry Norris tends to invest quite differently to many other managers in the Europe sector. This provides a greater chance to perform better, but the reverse is also true.
Most of his peers focus on developed European markets, including France, Germany and the Netherlands. Norris also invests in those countries. But he also finds some opportunities in eastern European countries, such as Russia and Hungary. Current investments include Hungarian bank OTP.
He also aims to invest in companies that have been through a tough time and can be bought at a more attractive share price. As long as he thinks they can grow their earnings in future. For example, he invested in Ryanair after its share price fell sharply last year. He says it's still one of the most profitable airlines in Europe and expects it to bounce back.
Overall he invests in a relatively small number of companies, which means each one can have a big impact on performance. He invests in a few smaller companies too. Both of these factors adds risk.