Threadneedle European Select - change of manager
Kate Marshall | Thu 09 May 2019
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- Benjamin Moore recently replaced Mark Nichols as the fund's co-manager
- David Dudding remains the other co-manager, which we think is a good thing
- The fund remains one of our favourites for investing in Europe
Our view
When it comes to investing, we think it's important to get to know the manager and team behind a fund.
David Dudding's invested in European companies for over 15 years. We've got to know him and his investment process well over the years. He's run Threadneedle European Select since 2008 and over that time he's had the support of a team of other managers and analysts.
But Mark Nichols recently stepped down as the fund's co-manager – a position he held since 2016. We think he made a valuable contribution to the fund and it's disappointing to see an experienced member of the team leave.
The fund's been left in good hands though and it still benefits from David Dudding's experience. He's built a robust investment process over the years and his long-term track record speaks for itself. We originally added this fund to the Wealth 50 because of our conviction in Dudding, so we're happy for the fund to keep its place on the list.
He also has the help of Benjamin Moore, the new co-manager, who's been part of the European team at Threadneedle since 2015.
Looking for sustainable growth
David Dudding and Benjamin Moore look for companies they think will grow sustainably over the long run. They should be able to grow earnings consistently and have an advantage, like a strong brand, which keeps them ahead of competitors.
It's a process that's worked well over the long run. Since Dudding took over the fund in 2008 it's grown 187.8%* compared with 105.1% for the broader European stock market and 97.7% for the average fund in the Europe sector.
Over the past year the fund hasn't performed as well as the market but it's done better than most other European funds. And we still think the fund has the potential to do well over the long run. Past performance isn't a guide to future returns though.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Mar 14 -
Mar 15 |
Mar 15 -
Mar 16 |
Mar 16 -
Mar 17 |
Mar 17 -
Mar 18 |
Mar 18 -
Mar 19 |
|
| Threadneedle European Select | 14.8% | -0.8% | 19.4% | 8.0% | 1.2% |
| FTSE World Europe ex UK | 7.5% | -4.2% | 27.9% | 4.3% | 2.6% |
| IA Europe ex UK | 6.8% | -1.8% | 24.0% | 5.8% | -1.7% |
Past performance is not a guide to the future. Source: *Lipper IM to 31/03/2019
A lack of investment in some of Europe's biggest pharmaceutical companies was one of the main things that held back returns over the year. In the healthcare sector the managers prefer medical technology firms, which they think have more growth potential. These companies develop innovative products and solutions to improve people's health and wellbeing. Current investments include Fresenius Medical Care, which specialises in dialysis services.
A number of other investments, like IMCD, helped performance. The company is a global leader in speciality chemicals, which are used in a wide range of products from cosmetics, food, drinks, cars, detergents, paint and medication. It has a competitive edge because few businesses provide the same chemicals, which limits the risk of its customers switching to another. It also has the potential to expand in other areas such as emerging markets.
A big part of the fund invests in the consumer goods sector, currently 26.3%. This helped performance for several years. But some parts of this sector are being disrupted and forced out of the market by smaller, more innovative competitors. So the managers are selective about where they invest. They keep on top of changes in the market and consumer tastes, to help find the most promising companies.
At the moment they prefer beauty, personal care and spirits companies. This includes L'Oreal, which recently performed well and the managers used this as a chance to take some profits. Beverage companies Pernod Ricard and Davide Campari-Milano also performed well over the year.
Elsewhere, new investments include Knorr-Bremse, the world’s leading specialist in braking systems for trains and trucks, and Interxion, the European leader in data storage and management. Luxury goods company Richemont was sold from the fund and so was Swedish bank Svenska Handelsbanken. The managers think it might not do as well because of increased competition for mortgage business.
Overall they invest in a fairly small number of companies. So each one can have a big impact on performance, though it’s a higher-risk approach.