Europe has been a graveyard for the hopes of small British investors. An onslaught of marketing by fund management groups in the 1990s lured investors into funds that, it was promised, would benefitas sluggish European corporates embraced Anglo-Saxon capitalism (downsizing, outsourcing, etc) and began generating huge profits. The euro would help, too.
It didn’t happen. The German stock market in particular has fallen harder and faster than any other major market and with it the investment funds that falsely believed that continental Europe would be insulated from an American downturn.
On average a European-invested fund (and there’s around pounds 20bn of British investors’ money in the sector) has fallen by 37% over the past three years, compared to the typical 28% fall in UK- invested funds. Yet there are two funds which have managed to hold their head above water and make money despite the downturn. They are Odey Continental European, up 15% over the past three years and Fidelity European, up 2%. All the other 116 funds in the sector have lost value.
Fidelity European was run by probably Britain’s best known fund manager, Anthony Bolton. He managed the fund for 17 years until the end of 2002, building it into a pounds 2bn collossus on the back of brilliant decisions to invest in then-unrecognised markets such as Norway and Ireland.
It is now run by Tim McCarron, who over the past six months has succeeded in keeping the fund in top quartile position, earning investors a gain of 20%.
But it has been pipped over three years by Odey Continental European, part of the group run by City legend Crispin Odey. He famously earned pounds 19m in just one year and is reckoned to have far more stashed into the hedge funds he now runs.
He passed over the management of Continental European to Hugh Hendry, a renowned “contrarian” fund manager. His bearish stance has worked well – for instance he cut the fund’s exposure to equities last year long before the market reached its nadir in March this year. For a while it even looked as if the fund would be ejected from the industry’s European classification because it began investing in South African gold shares and other non-European stocks.
Unfortunately for investors the strategy has not paid off in recent months as the market has rallied. The fund is up 9% over six months, when most others in the sector have jumped 15-20%. But the contrarian is unlikely to change his tune just because rivals have changed theirs.
