Investment Trust Insights: Europe is Cheap

A Closed-end Fund Forum reveals that investment trust managers think European stocks are among the 'cheapest in the world' right now

Jackie Beard, FCSI 22 October, 2013 | 10:58AM

Last week we had the latest instalment in the Best Advice: Closed-end Fund Forum webinar series. This month the focus was on Europe, particularly given the recent elections. David Harris of InvaTrust was the moderator and he was joined by Stephen Macklow-Smith of JPMorgan and Jeremy Thomas of Allianz. The aim of the discussion was to help advisors understand the issues and challenges of a new political and economic landscape that may occur in Europe and how it may impact investment decisions.

Both managers believe Europe is cheap right now and indeed that it’s one of the cheapest areas in the world. Macklow-Smith cited the fact that excessive risk premium has been attached to European assets for most of the last five years, partly due to uncertainty over the euro as a currency and partly because Europe has struggled to grow domestically. But an investment in a European company isn’t just about investing in Europe, in the same way that investing in the UK mega-caps isn’t about investing in the UK. Indeed, half of corporate revenues in Europe come from outside Europe.

Macklow-Smith went on to say that the political will to stand behind the euro was greatly underestimated by the rest of the world. His research shows him that there is a far greater willingness from European countries to do what it takes to be a member of the euro than people in the UK and US realise.

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About Author

Jackie Beard, FCSI

Jackie Beard, FCSI  is Director of Manager Research Services, Morningstar EMEA

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