JOHCM CONTINENTAL EUROPEAN FUND: Long-term investors rewarded, yields set to rise further despite Covid
The JOHCM Continental European investment fund has just celebrated its 20th anniversary – and rightly so.
The £ 515million fund, managed by UK asset manager JO Hambro Capital Management, has outperformed its benchmark (the MSCI Europe ex UK Index) in more years than it has underperformed. perform.
In doing so, it has provided solid returns for long-term investors – 595% for those who started in November 2001 and 227% for investors who invested ten years ago.
Investors who invested ten years ago have seen returns of 227%
The linchpin of the fund for much of its life has been investment manager Paul Wild, who ruled the bar for 14 years.
Wild believes the fund can continue to generate good returns regardless of the threat to markets and economic growth posed by Omicron.
“It’s clear that the coronavirus will be with us for a long time,” he says, “but I think the world has changed dramatically since the start of 2020 and businesses have adapted dramatically and effectively.”
Hoping that most European countries won’t enter a full lockdown in the coming weeks, Wild believes many companies could benefit from stronger earnings growth next year than many analysts predict.
He says: “If some supply chain problems abate, gas prices stop rising and consumers spend some of the savings they have accumulated since March 2020, the profit outlook for the future is ‘company are then favorable. “
The fund has almost 30% of its assets in financials
The fund is invested in 40 companies – UK stocks are not included in the portfolio.
Stock selection is driven by major investment themes which Wild and his assistant Justin MacGregor believe will dominate the markets in the months and years to come.
Three themes currently dominate – the low price of bank stocks, companies temporarily affected by supply problems (mainly car manufacturers) and Europe’s environmental transition which Wild considers more aggressive than elsewhere.
So it’s no surprise that the fund has almost 30 percent of its assets in financial stocks – like Axa, Societe Generale, Santander and Italian bank Unicredit.
“It looks like we are reaching a turning point in Europe when it comes to monetary policy,” says Wild. “Inflation is rising and interest rates will rise slightly in 2023 or even next year. Such an environment will allow banks to increase their margins and make more profits. ‘
Among its automotive holdings are key holdings in the German giants Daimler (owner of the Mercedes brand) and Volkswagen (Audi, Porsche, Seat and Skoda). In terms of the environment, its largest stake is in the French waste management company Veolia. It also owns a stake in German energy giant RWE.
In the 20 calendar years of the fund’s existence, it has underperformed in 2004, 2007 and 2017 through 2019. Wild says the fund’s most recent underperformance is due to an underweight in stocks of quality growth.
But as inflation and interest rates rise, he believes the fund’s focus on undervalued stocks will pay dividends.
JOHCM Continental European is not suitable for income seekers.
It also fails to make it to FundCalibre’s list of elite European funds (excluding UK). Those that do include BlackRock European Dynamic and Crux European Special Situations.
The fund’s market identification code is B993PD0 and its annual fee is 0.7 percent. JO Hambro Capital Investment Management manages assets in excess of £ 31 billion.