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M&G Investments has launched a pair of European equity funds, designed to tap into undervalued or mis-priced stocks.

The firm’s European Special Situations and European Strategic Value Oeics were launched last week.

The special situations fund invests in European companies that are undergoing a period of change, and are being mis-priced by the market as a result. The fund will be managed by Michael Stiasny, who also manages the £264.8m M&G European fund.

M&G said this was a pan-European fund, which would aim to hold a well-diversified portfolio investing in different baskets of shares to deliver a "style-neutral" portfolio.

The strategic value fund also invests in European stocks, including those in the UK. It aims to generate returns by exploiting the market’s pessimism about undervalued stocks, and capture their eventual revaluation.

Managed by Richard Halle, the fund will hold a diversified portfolio of 60-100 stocks. Mr Halle is also manager of the European portion of the £311.7m Prudential World Value fund.

Giles Worthington, head of European equities, said his team had three well-defined investment approaches – growth, change and value, all built on analysing the corporate life cycle.

The firm’s managing director of UK sales, Jonathan Willcocks, said the new funds completed M&G’s European product suite to meet the needs of investors across all market conditions.

The two new funds will sit alongside M&G’s existing European equity range, which also includes the £305.2m Pan European fund and the £163.3m European Smaller Companies fund.

Andrew Merricks, head of investments for Sussex-based IFA Skerritt Consultants, said: "Special situations funds tend to sound good, but seem to do better when smaller companies do well, and they are not right now. Launching a fund of that ilk might be a problem because we are too early in the downturn.

"It feels a bit like M&G is trying to fill the gap left by Cesar Perez who left for Credit Suisse last year. His departure left quite a gap there."

The M&G European fund has returned 47.5 per cent over three years to 18 February, outperforming the IMA Europe Ex-UK sector, which returned 45.7 per cent, according to Morningstar.

Fund Facts:

Initial charge: 4 per cent

Annual management charge: 1.75 per cent

Minimum investment: £500