Unlocking Europe's potential

In the recently launched FP Carmignac European Leaders OEIC fund, Mark Denham, Carmignac’s Head of European Equities, has delivered top decile performance to investors with a 1-year return of 14.0% versus -6.7% for its comparator benchmark¹.

¹ Performance of the A GBP share class from 15/05/2019 to 15/05/2020. Comparator benchmark: MSCI Europe ex-UK net total return USD. Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor). The return may increase or decrease as a result of currency fluctuations, for the shares which are not currency hedged.

In his recent presentation at Citywire’s UK Virtual Event, Mark explains what to look out for in Europe and how to identify companies with attractive long-term prospects. Watch the key takeaways in 5 minutes.

You can’t follow the index in Europe – you have to be highly active

As an analyst, Fund Manager and Head of Team, Mark Denham has been covering European equities since 1993. He believes Europe provides fertile ground for investment, if one takes the right approach: ‘There’s no getting away from the fact that Europe is a region of modest economic growth, […] the emphasis has got to be on secular growth – invest in companies that can grow under their own steam’.

Whilst Europe may not boast the tech giants such as the FAANGs, it is home to a multitude of innovative companies. ‘Contrary to what you might read in the press, innovation is alive and kicking in Europe’. Europe leads the way in what Mark regards as the next mega-trend – renewable energy. ‘Offshore windfarm development is growing more than twice the forecast rate for renewable energy, at more than 20% per annum² ”. The FP Carmignac European Leaders fund also owns a selection of biotech stocks.

The key to unlocking Europe’s potential lies in Mark’s well-oiled and disciplined investment process, fine-tuned over the last sixteen years: ‘To achieve a high conviction portfolio, we don’t assume even our best ideas have intrinsic merit – only through a rigorous and repeatable investment process can we be sure’.

Mark seeks companies with attractive long-term prospects which exhibit two characteristics – high, long-term profitability and the reinvestment of profits for future growth. The initial financial screening focuses on five key metrics and acts as a starting point for in-depth fundamental analysis.

Holdings must also have strong social responsibility credentials:

• A negative screening eliminates companies that appear on both Carmignac’s, and the Fund’s, exclusion lists
• Environment, social and governance criteria are integrated at both the analysis and decision-making stages
• A positive screening assesses companies’ contribution to society and the planet as per the specific UN SDGs³.

The fund is focused with 30 to 40 stocks and typically has an active share of 90%⁴.

*A GBP Acc share class ISIN code: GB00BJHPHZ49. Risk Scale from the KIID (Key Investor Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time.