Fidelity, SVM and Newton poised to capture German rally
German GDP grew by 0.3 per cent in the second quarter, compared with the first three months of the year, according to Federal Statistic Office figures released today (August 23).
Compared with the previous year, GDP grew by 0.5 per cent in the core European economy indicating that Germany may be seeing some relief from the debt crisis which has continued to weigh on growth in the region.
Three funds poised to take advantage of the upswing in Germany’s fortunes include the £467m Fidelity European Opportunities fund, the £15.3m SVM Continental Europe fund and the £15.9m Newton European Higher Income fund.
The Fidelity fund holds nearly 30 per cent of its portfolio in the leading European economy, with top holdings in blue-chip German companies such as industrial gases and engineering company Linde Group and electronics and electrical engineering conglomerate Siemens.
SVM’s fund holds 25.78 per cent and Newton’s 24.09 per cent in German companies.
Of the three, only the Fidelity European Opportunities fund, managed by Colin Stone, has outperformed the peer group over the year to date, returning 11.05 per cent to date, compared with an IMA Europe excluding UK sector average of 8.98 per cent, according to Morningstar.
However, the fund has underperformed the sector over one, three and five years, hovering in the second and third quartile over each period to August 10.
The SVM Continental Europe fund, run by Hugh Cuthbert, has underperformed the peer group over the year to date and over the one and five year periods, posting a loss of 9.5 per cent over five years, compared with a sector average loss of 1.9 per cent.
However, the fund has outperformed over three years, returning 16.5 per cent, while the sector achieved a 15.2 per cent average return.
Newton’s European Higher Income fund has also underperformed the sector year to date, as well as over three and five years.
After Fred Moore took over management of the fund in June last year, however, the fund has outperformed the sector, returning 4.4 per cent compared with a sector average of 3.2 per cent.
Mr Moore has gradually increased the fund’s weighting in Germany since the start of the year, reducing the holding slightly in March and boosting it in April.
With a swathe of market changing events slated for September, including Dutch elections and a vote in the German Constitutional Court on the legality of Europe’s bailout mechanism, the engine of the European economy could face a slowdown.
But if Europe can continue on a path toward growth and stability, these funds could significantly benefit from an increase in German productivity.