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Fund Review: Polar Capital European Income

The Polar Capital European Income fund has launched, to be managed by Nick Davis.

It will be an open-ended Ucits sub-fund listed on the Irish Stock Exchange. The fund will have a euro base currency but will also be available in sterling- and US dollar-denominated share classes.

It aims to identify mis-priced opportunities across the continent which may be reflecting “excessive short-term pessimism” or failure to price in duration. It hopes to achieve both income and capital growth and will target an overall yield of 10 per cent above the MSCI Europe Daily Total Return Net Euro benchmark index.

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The fund will be managed through a bottom-up stock-picking strategy using approximately 30 to 50 mid- to large-cap Pan-European stocks, and no investment will be made in companies with a market cap of less than €1bn (£782m).

No more than 20 per cent of the net asset value of the fund will be in companies with a market cap below €3bn (£2.3bn).

Stock selection is key to avoiding “value traps” where a “bargain” stock appears promising but over time the dividend is cut. The fund has a medium- to long-term horizon.

There is no minimum investment on the retail share class. The fund carries an annual management charge of 1.35 per cent pa.

www.polarcapital.co.uk

Comment:

For those looking to allocate to Europe again, this fund could be a good income option. The fund will aim to play on what the group says is the main “inefficiency” in the market – the time horizon.

The strategy is interesting and could pay off, as most of the problems in Europe over the past five years have been made worse thanks to short-term noise surrounding macro data.

Mr Davis joined the group in September from Threadneedle where he managed the £603m Threadneedle European fund, which saw solid and consistent returns throughout the eurozone crisis, so he has lots of experience in the area.

The fact there is no minimum investment can also be seen as a bonus for investors who do not want to put a large sum of money into a new fund.