Baring Europe Select - try something different
Kate Marshall | Fri 07 June 2019
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- A fund that offers something different to most others investing in Europe
- It's run by an experienced manager with a superior track record, giving us confidence about its future
- Some exciting companies have recently been added to the fund
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 long-term growth potential, though it increases risk.
There aren’t many managers with long and successful track records in this unique part of the market. We think Nick Williams is one of the few. His commitment to this fund and his long-standing investment process is hard to fault. It’s a quality we rate highly. He also has the help of Rosie Simmonds and Colin Riddles to run the fund, and together we think they make a solid team.
We're confident about the fund's long-term prospects and it currently features on the Wealth 50 list of our favourite funds. We think it could be used to diversify the European part of a wider portfolio, or one focused on larger companies.
Why smaller companies?
We think there are lots of compelling reasons to invest in smaller companies. They're innovative, flexible and have plenty of room for growth. They're often prepared to do something different to larger firms, which helps keep competitors at bay and customers loyal.
They also tend to grow their earnings at a faster rate than larger ones. This is important because growing earnings have tended to support share prices over the long run.
Nick Williams takes this one step further. He specifically looks for companies where the earnings potential hasn't been recognised by other investors yet. If he's right and these businesses turn out to be successful and grow their profits, their share prices could rise.
He has an edge in spotting these opportunities before others because most investors pay more attention to larger companies. He also has a well-resourced team by his side to help uncover future winners.
Over the long term it's been a recipe for success. Since Williams took over the fund in 2005 it's grown 550.5%*. That compares with 366.0% for the average fund investing in European smaller companies. Past performance isn’t a guide to future returns though, and smaller companies are higher risk and more volatile than larger companies. All investments fall as well as rise in value, so you could make a loss.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Apr 2014 -
Apr 2015 |
Apr 2015 -
Apr 2016 |
Apr 2016 -
Apr 2017 |
Apr 2017 -
Apr 2018 |
Apr 2018 -
Apr 2019 | |
| Baring Europe Select | 10.1% | 8.3% | 33.8% | 10.4% | 1.4% |
| IA European Smaller Companies | 7.1% | 5.7% | 31.7% | 11.8% | -2.4% |
Past performance is not a guide to the future. Source: *Lipper IM to 30/04/2019.
What's changed in the fund?
Nick Williams recently sold, or reduced, some investments that have performed well and made a profit. Wirecard, the digital payments provider, was sold towards the end of last year, for example. He's reinvested in companies he thinks have more growth potential.
New investments include Tomra, which makes reverse vending machines. They offer an innovative solution – users deposit their recycling in these machines in exchange for payment or tokens to use at a local store. It encourages people to recycle more and helps governments meet certain targets. Increased environmental awareness across the globe is driving pressure for new recycling solutions, and Williams thinks the company could benefit.
Italian clothing company Moncler was also added to the fund. Its shares fell last year and the manager used this as a chance to buy some at a more attractive price. He says the company's growing faster than most others in the luxury goods sector and its plan to open new stores has been well-managed. It's also making plenty of cash and he thinks the strength of its brand will help drive future returns.