This fund invests in companies where we believe the opportunity for positive change has been overlooked and so undervalued by the market.
Why this fund?After over a decade of low growth and relative market underperformance, the opportunity in Europe is much more encouraging. This is in part because investors are starting to question whether the era of US exceptionalism may be coming to an end, meaning Europe looks much more attractive on a relative basis. But more interestingly than that, there are changes afoot in Europe itself which are driving a much-improved outlook: Lower interest rates and lower inflation; a stronger consumer with increased real wages and the savings available to spend; plus, of course, meaningful fiscal stimulus, not least the recently announced investment in infrastructure and defence in Germany.
A rigorous focus on investing in companies changing for the better that offer good value.
Finding opportunities that have otherwise been overlooked by the market, unwilling to price in the potential for positive change ahead.
An alternative, differentiated approach to active investing that delivers a highly diversified portfolio as well as ‘Value’.
We refer to our approach to invests in companies where we believe the opportunity for positive change has been overlooked and so undervalued by the market as Quality Transition. This differentiated approach results in portfolios which offer good long-term alpha with very low correlation to the main global indices and so good diversification, as well as a ‘Value’ output. It requires a combination of rigorous investment analysis, discipline, patience and regular direct engagement with the companies by the fund managers.
Of central importance to the investment process is correctly anticipating material positive changes for the underlying companies and the likelihood of those changes coming to fruition.
To be successful requires an in-depth understanding of company and industry fundamentals as well as being prepared to invest for the long term.
Engaging with companies is a critical component in understanding change. Collaboration and respectful challenge are key to how we engage as a team.
Access the Invesco Euro Equity Fund product page to view KIDs/KIIDs and factsheets. The investment concerns the acquisition of units in an actively managed fund and not in a given underlying asset.
Oliver Collin and Steve Smith manage the fund’s stock selection. Oliver has more than 20 years’ experience, while Steve has over five. The investment team has extensive knowledge of local markets and a track record of identifying companies with attractive return potential.
“Europe appears to be having its Uno Reverse Card moment: Investor interest is moving away from the US as the era of US exceptionalism appears to be coming to an end and, instead, they are looking more towards Europe where domestic investment and intent is on the rise.”
Oliver Collin, European Equities Fund Manager
We believe that the scene is being set for a stronger macroeconomic backdrop in Europe; yes, the overall picture is complicated and not helped by politics, but the underlying data is encouraging.
This outlook of macroeconomic improvement (admittedly from very low levels) would be a supportive backdrop for our Quality Transition approach, that is investing in companies that are able and willing to change for the better. Valuations are a key component of our investment process and there are many opportunities in the European equities space whose Quality Transition characteristics have been over-looked by the markets and so are attractively valued.
Positive change for a company is often closely aligned with and affected by market cycles and, given the improving outlook described above, the strategy is positioned for cyclical recovery in order to benefit. This is the opportunity for active investors in European equities.
We prefer a ‘quality transition’ (good companies to great companies) approach over a compounders (great companies that stay great) approach and over a macro approach (trying to time the market). This is because our analysis suggests that Quality Transition generates greater returns over the long-term.
We continuously analyse the European markets for valuations that we believe do not reflect the future prospects of the underlying companies. A key component of this research includes three-year IRR analysis for every portfolio holding and large index stock.
We have no preconceived style bias towards stocks, sectors or countries, rather we look for the best investments at any point in time.
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.
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