In the current climate, it’s understandable that investors might be uncertain about how to approach Europe. But while uncertainty is one of the signature catchwords of our time, there are still many great opportunities in Europe for UK investors, if you know where to look.
Like many regions, Europe is suffering from the US-China trade dispute, and also has troubles of its own: stuttering economic growth (the latest IMF economic projections forecast 3.0% global growth in 2019, 6.1% for China, 2.4% for the US, and 1.2% for the Euro area), the expansion of nationalistic politics, Brexit, or immigration issues (1).
But Europe has much more to offer than perhaps meets the eye.
Europe's equity markets returned on average 7% to 8% per annum compound over the past three years. It has world-renowned brands, from quality car manufacturers, global food and beverage names, to famous fashion labels. Europe is also the home of leading biotech, technology, and renewable energy names, and is recognised as an innovative region - according to the 2018 Global Innovation Index, eight out of the world's top ten innovative countries were European (2).
To find opportunities, an active approach is needed.
Europe's financial sector has a well-established reputation, but its impact is waning. Financial sector earnings as a percentage of European GDP peaked at over 5% before the global financial crisis but have since halved. And yet, the weighting of financials in the Stoxx 600 is 20,0%. On the other hand, the weighting of technology in the Stoxx 600 is a mere 5.1% - compared to its 21.9% in the S&P 500 and 26.7% in the MSCI Emerging Markets Index. But this is misleading as Europe has many more innovative tech opportunities on offer than is suggested by this 5.1% (3).
We don't follow the crowd.
We are active managers and stock-pickers. We have the freedom to explore where our convictions lead us, and we aim to turn challenges into opportunities. In FP Carmignac European Leaders, we look to identify the finest 30-40 (4) companies in Europe ex-UK with the most attractive long-term growth potential, those who exhibit high sustainable profitability and who reinvest for the future. To do this, we need to be focussed, selective, disciplined, and use our experience to follow our convictions in the search for Europe's finest.
Risk scale 5 from the KIID (Key Investor Information Document) for the A GBP acc share class. Risk 1 does not mean a risk-free investment. This indicator may change over time. The Company presents a risk of loss of capital. The risks and fees are described in the KIID. MAIN RISKS OF THE FUND: EQUITY: The Fund may be affected by stock price variations, the scale of which is dependent on external factors, stock trading volumes or market capitalization. CURRENCY: Currency risk is linked to exposure to a currency other than the Fund's valuation currency, either through direct investment or the use of forward financial instruments. DISCRETIONARY MANAGEMENT: Anticipations of financial market changes made by the Management Company have a direct effect on the Fund's performance, which depends on the stocks selected. The Fund presents a risk of loss of capital.
(1) Source: IMF, World Economic Outlook, October 2019. (2) Source: The Global Innovation Index web page, 2019. (3) Index composition as of 30/09/2019. Tech in MSCI EM includes communication services. (4) As of 30/09/2019, the portfolio held 36 stocks. Portfolio composition may change at any time and without previous notice.
This document may not be reproduced, in whole or in part, without prior authorisation from the Investment Manager. This document does not constitute a subscription offer, nor does it constitute investment advice. Past performance is not necessarily indicative of future performance. FP Carmignac ICVC (the "Company") is an Investment Company with variable capital incorporated in England and Wales under registered number 839620 and is authorised by the Financial Conduct Authority (the "FCA") with effect from 4 April 2019 and launched on 15 May 2019. FundRock Partners Limited is the Authorised Corporate Director (the "ACD") of the Company and is authorised and regulated by the FCA. Registered Office: Second Floor, 52-54 Gracechurch Street, London EC3V 0EH; Registered in England and Wales with number 4162989. Carmignac Gestion Luxembourg SA, UK Branch (Registered Office: 2 Carlton House Terrace, London, SW1Y 5AF. Registered in England and Wales with number FC031103, CSSF agreement of 10/06/2013) has been appointed as the Investment Manager and distributor in respect of the Company. Access to the Company may be subject to restrictions with regard to certain persons or countries. The Company is not registered in North America, in South America, in Asia nor is it registered in Japan. The Company has not been registered under the US Securities Act of 1933. The Company may not be offered or sold, directly or indirectly, for the benefit or on behalf of a U.S. person, according to the definition of the US Regulation S and/or FATCA. The Company's prospectus, KIIDs and annual reports are available at www.carmignac.com or upon request to the Investment Manager. The KIID must be made available to the subscriber prior to subscription. This material was prepared by Carmignac Gestion Luxembourg SA and is being distributed in the UK by the Investment Manager.