Europe blue-chip index
measured against MSCI
Europe. The reason is that
the FTSE 100 has a large
weighting of oils, telecoms,
pharmas and banks.
“But it is noticeably
lacking pro-cyclical sectors
such as luxury goods, autos
and consumer electronics.
In the current investing
environment, with many
asset management houses
taking a pro-cyclical view
in their asset allocation, a
bias towards the UK may
lead to underperformance
relative to investing in
Europe because of this.”
l Flexible investing
Elliot insists a pan-European
investing approach allows
an investor to move in
and out of economies
depending on relative GDP
growth rates. JPMorgan is
forecasting real UK GDP
growth of 1.2% in the UK
for 2010, compared with
1.7% for Germany and 2%
for France. Meanwhile, the
emerging Europe universe
has Turkey with GDP forecast
of 4.3% and Russia at
5.5%. Faster GDP growth
will mean faster corporate
earnings growth, so better
chance of share price
appreciation.
He argues that currency
risk is not as bad people
think it is – at least for the
long-term investor.
“Sure, currencies are
unpredictable and, for the
short term, it gives inves-
tors in overseas stocks a
problem as it adds extra
risk to a portfolio. Such
an investor may wish to
hedge back into their base
currency, effectively receiving
local currency returns
minus the small cost of the
hedge.
“But it is probably best
not to hedge for any investment
horizon over a few
years, because we usually
see outperformance from
stock markets in the years
following a depreciated
currency, so making up for
the investor’s initial currency
loss.”
As a fund picker, Peter
McGahan, investment
adviser at Worldwide
Financial Planning, points
out that Europe funds
excluding and including
UK perform quite similarly
with virtually no difference
in sharpe ratio and standard
deviation over a fiveyear
period.
But he says: “The standard
deviation of Jupiter
emerging European markets
or Neptune Russia and
Greater Russia, for example,
is over 50% greater
than that of the Europe ex
UK and inc UK. No surprise
really. Returns over five
years are also different.
“Emerging Europe is a
specialist field and not to
be undertaken lightly. The
potential for gain and loss
is much greater than that
of the developed sectors
of Europe excluding and
including the UK.”
EQUITIES EUROPE
SUMMARY
Pan-European investing allows
an investor to move into and
out of economies depending
on relative GDP growth rates.
Many large European firms
have a pan-European and often
global presence that makes the
state of their domestic market
less of a concern.
Currency risk remains
a concern for UK-based
investors but this may not be
such a big problem for those
with a long term view.
We believe that Europe offers many strong investment ideas, and is ideally positioned to benefit benefi from the next stage of
the economic cycle. The BlackRock European Dynamic Fund makes the most of such a diverse range of opportunities.
Managed by AA Citywire rated manager Alister Hibbert and backed by a highly experienced team of 13 investment
professionals, Alister has delivered outstanding performance and remains confident
that the current environment is
suited to his proven flexible approach. Look to BlackRock. Opportunity Found.
• Top decile over 1, 3 and 5 years
• Beaten the sector average by 53% over 5 years
• No.2 fund in the sector since Alister took over
management in March 2008
Call 08457 405 405
Call 08457 405 405
or visit blackrock.co.uk/europe
% returns, as at
31 March 2010*
to 31.03.2010. All fi nancial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount
of the investment. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. Unless indicated the
Prospectus which are available from the Manager. Issued by BlackRock Investment Management (UK) Limited (authorised and regulated by the Financial Services Authority).
recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited. © 2010 BlackRock, Inc.
1
year
3
years
Mng
Tenure
5
years
European Dynamic Fund 74.0 31.0 30.8 106.8
Europe ex UK Sector Av. 45.4 0.6 1.8 53.8
Outperformance 28.6 30.4 29.0 53.0
Position in sector 2 / 106 2 / 91 2 / 100 2 / 76
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