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Has Greece's contagion hurt European funds?

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

How European equity funds are faring amid investor concern over Greece's debt crisis.

European stock markets have been on a roller-coaster ride because of fears of the contagion spreading to other weak euro zone countries, and slowing economic growth.

TODAY'S SEARCH

We screened European equity funds, and ranked year-to-date returns to April 28 by the best performers to see who is best weathering the storm.

Excel Emerging Europe and Chou Europe, which are in other fund categories, were also added to this group. U.S. dollar, segregated, pooled and duplicate versions of funds were excluded.

WHAT DID WE FIND?

Most of the European-focused funds are in the red.

Dynamic European Value, however, has been holding up the best so far this year with a 4.6-per cent gain, and the loner in positive territory.

"Europe is definitely an out-of-favour region," said manager Chuk Wong of Goodman & Co. Investment Counsel. "It's a region for contrarian investors and stock pickers."

Large-cap stocks have run into headwinds in the current environment, but the Dynamic fund, which owns 37 stocks, is invested mainly in mid-cap companies, and also has about 18 per cent in emerging European countries, he said.

Twenty per cent of the fund is in Britain; 14 per cent in Germany; 8 per cent in the Netherlands and 7 per cent in Greece. Some of the winners include names like Vienna Airport, Aggreko PLC and also Garanti Bank, a Turkish bank. "Turkey has been resilient throughout the crisis," said Mr. Wong, a value manager.

While many stocks have double-digit returns this year, that is not reflected in the performance because of currency depreciation. The fund is only partly hedged, he added.

Excel Emerging Europe, which is run by Baring Asset Management Ltd., came second with a loss of only 0.40 per cent. Russia represented 56 per cent of the fund at March 31, followed by Turkey at 16 per cent, Poland at 8 per cent and Hungary at 5 per cent.

Russian stocks continue to be undervalued with consensus earnings estimates indicating average growth of 20 per cent over the next year, said Paul Mesburis, an executive with Excel Investment Counsel.

The fund is also invested in other eastern European countries that get grants from the European Union to help build their infrastructure, he said. "That will provide those economies a minimum of 2-to 4-per-cent GDP growth between now and 2013."

AGF European Equity Class, which is co-managed by John Arnold and Rory Flynn, suffered the most - a 17-per-cent loss. The fund was 75 per cent invested in Britain and France with half of its assets in the financial sector at the end of March. While the short-term performance of this fund is hardly flattering, it still had the best average annual return - 7.1 per cent - for the 15 years ended March 31. It illustrates that recent performance is no reflection of historical returns.

*****

How Europe-focused funds are doing this year
(Mar. 31)Latest(Apr. 28)% rtn (Mar. 31)
Fund nameAssets ($-mil)MERYTD % rtn1-yr3-yr5-yr10-yr15-yr
Dynamic European Value60.72.474.6%45.1%-13.3%-1.0%-3.3%4.2%
Excel Emerging Europe A*11.42.92-0.4%83.1%
BMO European85.92.38-3.2%33.2%-15.1%-2.5%0.4%3.9%
BMO GDN European AD Sr4.2-3.2%
Chou Europe**8.01.80-3.7%29.2%-14.0%-6.0%
Trimark Europlus168.32.70-4.0%22.7%-15.5%-2.4%1.0%
AIM European Growth Class36.42.84-5.0%24.7%-12.5%0.2%
Investors Euro Mid-Cap Equity-C810.72.87-5.3%28.7%-13.2%1.2%
Fidelity Europe-A42.52.66-6.0%21.0%-9.5%3.1%-2.8%4.7%
Mackenzie Ivy European Class10.22.51-6.7%11.6%-4.0%2.7%
CI European62.62.33-6.8%19.7%-16.7%-3.1%-1.6%1.8%
IG Mackenzie Ivy European-C216.42.87-6.8%11.3%-4.3%2.4%-2.8%
RBC European Equity1,590.12.15-7.3%17.5%-12.5%-3.3%-5.6%3.1%
TD European Growth53.72.68-7.5%21.5%-13.7%-3.0%-4.7%2.0%
Manulife European Opportunities Fd8.12.70-7.7%27.8%
FÉRIQUE European85.61.25-7.8%29.6%-11.0%-0.3%
Tmpltn European CC1.42.62-7.9%16.2%-17.2%-5.5%
CIBC European Equity190.02.53-7.9%26.3%-8.3%0.7%-2.8%
Standard Life European Equity-A11.02.44-8.3%22.8%-15.7%-2.8%
Quebec Professionals European Equ40.61.49-8.3%18.5%-15.8%-3.7%-4.2%
Scotia European20.22.68-8.3%20.7%-16.1%-3.5%-5.9%
Altamira European Equity38.42.35-8.3%17.7%-15.4%-3.6%-4.6%3.2%
CIBC European Index60.11.10-8.8%24.0%-12.0%-0.9%-2.7%
Stone & Co. EuroPlus Div Growth A8.03.28-9.1%14.8%
Mackenzie Univ European Opport163.22.44-9.3%15.7%-15.9%-3.8%-6.0%6.1%
TD European Index46.90.97-9.3%24.8%-12.2%-0.9%-2.6%
Renaissance European15.52.70-10.1%23.9%-12.1%-1.8%-2.7%4.0%
HSBC European-I51.22.43-10.5%22.6%-14.3%-2.2%-3.7%5.6%
Investors European Equity-C1,002.12.86-10.6%18.1%-13.2%-1.2%-1.2%4.8%
Investors European Div Growth C36.22.86-11.5%20.5%-15.7%
AGF European Equity Class602.03.01-17.0%19.9%-17.4%-2.5%2.0%7.1%
MSCI Europe ($ Cdn)26.7%-11.1%0.4%-1.3%5.9%
S&P/TSX Total Return3.7%42.1%0.0%7.4%4.7%9.3%
*emerging markets equity **global small-to-mid cap equity
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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