Europe 

Guide to investing in Europe

  • Understand how Europe's recovery has helped investor sentiment improve.
  • Learn where the opportunities are in European equities and fixed income.
  • Comprehend whether Europe's economic recovery is secure and what might derail it.
CPD
60min
Guide to investing in Europe

Introduction

For the first time since the financial crisis, Europe's economy is back on track, with the European Central Bank's monetary policy stance having paid off, and European companies are posting profits this year.

Politically, there has been little upheaval. Whereas the UK and US are currently going through some political turmoil, many of the elections in Europe have not produced the support for populist parties that investors were worried about.

As a result, UK investors are suddenly piling back into European equity funds and getting exposure to the region through other asset classes.

Roland Grender, a senior analyst at Crux Asset Management, suggests: "European markets are in vogue this year due to a number of factors. In comparison with last year there are some economic green shoots emerging in terms of improving consumer confidence and PMIs.

"Employment is tightening in some European countries and you could make the argument that industrial capacity is also stretched in some areas.

"There have also been constructive political developments in France, Germany and Holland which have caused fears of extremist government policy to recede. Europe’s lower valuation relative to other markets, especially the US, has also helped drive a relative rerating."

This guide takes a closer look at the reasons for Europe's recovery and asks whether it risks being derailed by other factors. 

It also considers where the opportunities are in European equities and the outlook for fixed income.

This carries an indicative 60 minutes' worth of CPD.

Contributors to this guide include: Chris Hiorns, manager of the Amity European fund at EdenTree Investment Management; James Rutherford, co-head of investments for European equities at Hermes Investment Management; Jeff Taylor, head of European equities at Invesco Perpetual; Nick Davis, fund manager, European income at Polar Capital; Olly Russ, European income fund manager at Liontrust; Rogier Quirijns, senior vice president and portfolio manager at Cohen & Steers; David Stubbs, head of client investment strategy for EMEA at JPMorgan Private Bank; Guy Foster, head of research at Brewin Dolphin; Kommer van Trigt, head of global fixed income macro at Robeco; David Zahn, head of European fixed income at Franklin Templeton Fixed Income Group; Chris Iggo, chief investment officer, fixed income at Axa Investment Managers; Ritu Vohora, equity investment director at M&G Investments; Wouter Sturkenboom, Russell Investments; Philip Webster, BMO Global Asset Management; Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers; Tristan Hanson, manager of the M&G Global Target Return fund; Léon Cornelissen, chief economist at Robeco; Dylan Ball, executive vice president, portfolio manager at the Templeton Global Equity Group; Edward Rumble, portfolio manager of the RWC Pensato European Equity fund; Roland Grender, senior analyst at Crux Asset Management; Eurostat; Investment Association; Rathbones.

eleanor.duncan@ft.com

In this guide

CPD
60min
  1. Mr Davis says Europe's improving outlook has coincided with three other things. Which of these is not one of them?

  2. Mr Rumble says European indices have a higher weighting in which two types of stocks where growth has been a problem recently?

  3. When you break down their GDP growth you’ll see it’s predominantly tourist driven, which doesn’t affect the real economy really. Which European country is Mr Rutherford talking about?

  4. Is this statement by Mr Iggo true or false? If the ECB wasn’t buying or had announced a more rapid winding down of its QE programme, I suspect that Spanish spreads would be much higher today than they are.

  5. Mr Stubbs has identified an opportunity outside the core eurozone. What is it?

  6. Growth in the Eurozone is at its strongest since what year, according to Mr Ahmed?

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