Achieving diversification in a European Equity portfolio

This article is part of
Guide to European equities

“The benefit of operating globally is therefore we can look to the Americas and China for leading technology companies and Europe for leading staples and augmenting healthcare positions.”

James Milne, who co-manages the Crux European fund, says buying cheaper shares at a time when many markets are trading at historically high price levels is itself a form of diversification, and eurozone shares are themselves cheap right now. 

He says he focuses on companies that do business globally, but “just happen” to be listed on a European stock exchange, and believes this diversification of corporate earnings allows for a broad-baked economic exposure. 

James Sym, Europe equity fund manager at River and Mercantile, says the relative cheapness of European shares is “extreme in some areas”.

He says: “Some of the good European banks are presently trading at about half of their book value, and every time throughout history that this has happened the bank shares have bounced back sharply. It may be we need somewhat higher inflation for that to happen this time, but the market is currently pricing no chance of that happening, which is why it’s a diversifier.”

David Thorpe is special projects editor at Financial Adviser and FTAdviser