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European equity funds beat UK post Brexit

European equity funds beat UK post Brexit

Over the 12 months since the UK voted to leave the European Union, European equity funds have been the clear winners.

The Investment Association's European Smaller Companies funds have outdone their rivals, giving returns of 34.72 per cent.

Hot on their heels is the IA Europe ex-UK portfolio with an average return of 34.18 per cent.

Trumping expectations is the IA UK Smaller Companies sector, which recorded returns of 26.30 per cent, outdoing the IA UK All Companies division, which came in with 19.41 per cent.

Darius McDermott, managing director of Chelsea Financial Services, said: “Despite UK equity markets holding up surprisingly well in the year since the EU referendum, and continuing to reach all-time highs, European markets have done even better.

“With so much uncertainty still ahead of us, it is quite possible this trend will continue in the short term at least, especially as European markets are less overvalued and many of their economies look to be in better shape.

"Positive growth numbers on the continent are coming into focus now some of the contentious national elections are out of the way. There are, of course, exceptions to the rule and it is good to see that both Old Mutual and Cavendish have managed to do very well in the UK smaller cap space, despite the headwinds.”

Old Mutual and Cavendish both made the top 10 UK and European funds, which were topped by Henderson European Smaller Companies over the last 12 months.

IA European Smaller Companies enjoyed a 34.72 percentage return over the year, bettering second-placed IA Europe Ex-UK holdings by 0.54 per cent over the same period.

Joshua Gerstler, partner at The Orchard Practice, said: “I think there is a real opportunity for people to invest.

"Interest rates on savings are very low, we are talking in the region or 0.01 per cent to 0.04 per cent, so locking up cash is not all that attractive.

"Equities appear more attractive, but investors need to be cautious as the broader political landscape, with the US and UK in flux, plus the French election to consider, there are no certainties.”

dan.moore@ft.com