Europe may be somewhat unloved by global equities fund managers, with many continuing to underweight the region but BMO’s European Assets Trust’s half year results indicate there is plenty of alpha left for a skilled manager.
For the six months to 30 June, the trust’s sterling share price appreciated 25.5 percent, or 25.9 percent in euros.
In net asset value (NAV) terms, the closed-ended fund returned 19.6 percent beating its index, the EMIX Smaller European Companies (ex UK), which returned 16 percent.
The fund has also closed its discount to NAV to 5.5 percent from 9.5 percent at the beginning of the reporting period.
In terms of holdings, cyclical sectors such as industrials performed well for the fund with recycling company Tomra up 48.7 percent and chemical distributor IMCD appreciating by 44.4 percent.
The European financials sector, a ‘no go’ zone for many managers, also put in a good performancel for the fund. Italian asset manager Azimut appreciated by a massive 93.1 percent, and the fund acknowledged “robust performance” from Ringkjoebing, Landbobank and Sparebank. It should be noted that these are Nordic banks and therefore insulated from the problems facing peripheral Eurozone banks in countries such as Spain and Portugal.
Sam Cosh, fund manager of the trust, said: “We cannot make predictions on the decisions of central banks nor the outcome of political events, or the direction of economic output.
“We can however select stocks with characteristics that give us the best opportunity to deliver good returns for our shareholders through the market cycle. We want to hold good companies, run by good managers, and we do not want to pay too much for these businesses. Our portfolio in aggregate reflects these characteristics and should, therefore, in our opinion deliver good returns for our shareholders.”
He added that these pleasing results did not come by way of using gearing, that is leveraging up in a rising market to capture the upside potential.