A European Equity Fund which looks to exploit opportunities which are transitioning for the better, such as via a restructuring, digitalisation or decarbonisation, but that are overlooked and so mispriced by the markets.
After years of depressed activity, Europe is on the path to recovery.
Governments have taken measures to redistribute wealth, while investment in tech and climate change are growing dramatically.
Europe draws more visitors than any other region in the world. But investors still struggle to see it as an investment destination. On the surface, it isn’t hard to see why: its economy has been sluggish since the global financial crisis, and its businesses seem less exciting than those you can find elsewhere.
But we dig deeper – because it’s always good to look for opportunities where others aren’t looking.
Super: What are the opportunities in Europe?
When investors think about ‘Technology’ and ‘Digitalisation’ as investment themes, most tend to focus on traditional innovation, and therefore, the US and Asia.
But digitalisation is also providing investors with opportunities in Europe. It’s home to technology companies, such as Cap Gemini and SAP, but industrial and consumer-facing companies are now part of the story.
Super: The Digitalisation of Everything
You see, the ‘Digitalisation of Everything’ is the catalyst for turning more traditional businesses into innovative ones. For those embracing the change, it’s about much more than just having a website or adopting a cloud strategy – it’s about sustainability and long-term value creation.
Super: Sustainability and long-term value creation
Covid-19 has shown us how important digital technologies are. With millions of people staying at home, many turned to digital devices that enabled them to work and connect with friends and family across the globe.
The pandemic has changed us. So, it’s perhaps not surprising that the EU’s response to it marked a significant departure from the austerity economics that has dominated policymaking since the global financial crisis.
Super: Europe’s €750bn recovery fund
A €750 billion recovery fund – dubbed ‘Next Generation EU’ – has been created to help Europe emerge from the pandemic not just stronger, but also greener and fairer.
A large share has been set aside to support the region’s green and digital transition. Energy independence has become a priority. And with its strong engineering base, Europe also has the opportunity to become a global exporter of green tech products and services.
Super: Global exporter of green tech products and services
But the benefits must be widely shared.
The recovery plan supports initiatives that aim to reduce social inequality and foster inclusion. Creating quality jobs within the ‘new economy’ will be an important element here.
Covid-19 has also tested the resilience of global supply chains. And so, after decades of offshoring manufacturing jobs, momentum is building to bring supply chains closer to home. Any instability arising from geopolitical conflicts will only strengthen this view.
Super: Bringing supply chains closer to home
Reshoring or nearshoring is high on the agenda of many European companies, and is likely to benefit Europe as a whole. Policies that encourage bringing employment back to the region can help accelerate this.
All these actions will have important economic and investment consequences. As with all changes, there are risks to be considered, but substantial opportunities will also be created.
Discover the potential of Europe with us.
Super: Discover the potential of Europe with us.
All our European equity portfolios are actively managed and attractive valuations underpin all investment decisions; our philosophy is to identify companies with valuations that do not reflect their future prospects.
Using an active investing approach we search for the best opportunities at any point in time in whatever stock, sector or country.
Behavioural biases repeatedly give rise to market inefficiencies: markets often overreact by focusing on near-term issues, while expectations are often overly influenced by the extrapolation of current trends.
We aim to take advantage of these inefficiencies by placing a strong emphasis on valuation. Plus we engage closely with the underlying companies and their management teams to really understand the full potential of their strategy and targeted returns.
Oliver Collin and Steve Smith are part of the Henley-based European Equities team. Both manage the fund’s stock selection. Oliver has more than 20 years’ experience, while Steve has over 5.
The team has extensive knowledge of local markets and a track record of identifying companies with attractive opportunities.
Oliver Collin, European Equities Fund Manager and Steve Smith, Deputy Fund ManagerThrough incentivising companies to innovate and embrace climate change Europe can become a global exporter of Greentech products and services to the rest of the world.
The team has a combined investment experience of more than 25 years in European equities.
Investment opportunities are opening up in social inequality and climate change. Companies are also transforming digitally and improving productivity. Growth in this area is expected to be dramatic.
Looking ahead equity markets will need to navigate stubbornly high inflation. However, a mild winter and widespread efficiency gains in energy usage means rationing is off the table and next winter will likely not be a problem. This is supportive for economic growth going forward. Furthermore, many of the areas which naturally attract the Fund’s focus are short duration in nature and therefore benefit from the current higher interest rate environment relative to longer duration/growth assets which need lower rates.
You can invest in the European stock market by investing in actively managed mutual funds or exchange traded funds (ETFs). Invesco offers a broad range of actively managed funds and ETFs.
We identify stocks with valuations that have not been reflected by the market but future prospects may be recognised by it later. We have no preconceived bias towards stocks, sectors or countries, rather we look for the best investments at any point in time.
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