UK Stocks Drag Down European Equity Funds

For European equity fund managers, the UK has been the worst performing country year to date, dragged down by falling sterling

Francesco Paganelli 30 November, 2016 | 2:39PM

For European equity fund managers, the UK has been the worst performing country year to date, though that has largely been driven by currency translation. The pound has tumbled against the euro by more than 15% in 2016. But in pound terms, the Morningstar UK Index has returned a hefty 13.5% in 2016.

Most top-rated funds in the Europe large-cap equity categories were somewhat underweight the UK. The average exposure to UK stocks was 25% compared with 27% in the Morningstar Europe Index. Therefore, the allocation effect was muted for many funds. That said, most managers were caught off guard by Britain’s vote to leave the European Union, and stock selection had a more pronounced impact, especially for those funds that were short commodity-driven names and favoured domestic-oriented UK stocks.

Bronze-rated T. Rowe Price European Equity was negatively affected by poor performance among holdings such as Capita, Howdens Joinery, and William Hill, while Berkeley, Great Portland Estates, and Lloyds Banking Group were among the largest negative detractors from performance for Silver-rated BGF European Special Situations.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Allianz Euroland Equity Growth A EUR223.14 EUR1.29
Allianz Europe Equity Gr Sel A EUR160.94 EUR1.15
T. Rowe Price European Eq A EUR13.67 EUR0.10
Threadneedle European Sel Rtl Acc GBP3.44 GBP2.24

About Author

Francesco Paganelli  is a Fund Analyst for Morningstar in Italy

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