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As Europe stabilizes, big losers turn into big winners

What are we looking for?

How battered European equity funds are faring this year as optimism grows that the euro zone will contain its sovereign-debt crisis.

The screen

We looked at the eight best and eight worst returns this year to March 15. U.S. dollar and segregated funds were excluded, as well as funds targeted at certain professional groups. Nearly all duplicate versions were omitted.

What did we find?

Some of the biggest dogs of 2011 are enjoying the biggest jumps in 2012.

Manulife European Opportunities Fund, which shed 21 per cent last year, led the pack with a nearly 15-per-cent gain. Dynamic European Value, the heaviest loser with a 30-per-cent loss, is up nearly 13 per cent.

"Indiscriminate selling across the board" hurt European stocks and the Dynamic European fund last year, says its manager and stock picker Chuk Wong of GCIC Ltd. (formerly Goodman & Co. Investment Co. Ltd.) "But we held onto the names."

The European Central Bank's cheap loans to lenders under Long-Term Refinancing Operations (LTRO) beginning in December were the "watershed event" that helped to lift markets, he said. "The financial system has been stabilizing, and there won't be any more concerns about [bank] liquidity issues over the next couple of years."

Some of his fund's winners this year include German auto machinery maker Duerr AG, Danish brewing giant Carlsberg AS, British instruments and controls maker Spectris PLC and French bank BNP Paribas SA.

He increased his weighting in beaten-up financial stocks last fall to 12 per cent of the fund from about 8 per cent, mainly by adding BNP Paribas. "They are very cheap stocks," he said. "We believe that these banks (which we own) will not go under ... We were early at that time, but it paid off."

Several European countries face challenges because they are in recession or are struggling with debt, but most of that risk is already factored into the stock markets, Mr. Wong suggested.

"I think the market is turning more rational," he said. "The last two months may have been an across-the-board recovery, but going forward it will be based more on stock selection."



ASSETS (in3/15/20122/29/2012Calendar Year ReturnsTo Feb. 29, 2012
FUND NAMEMERmillions)YTDYTD201120102009200820071 YEAR3 YEARS
Top 8 Funds
Manulife European Opportunities Fd2.8913.915.74%14.91% -20.77%0.88%18.59%-41.23% -13.30%9.61%
Dynamic European Value2.4940.414.62%12.81%-30.26%11.08%28.68%-38.30%-19.28%-19.70%7.85%
Fidelity Europe-A2.6122.814.20%11.72%-14.22%6.22%10.16%-37.00%18.09%-6.23%10.62%
Investors Euro Mid-Cap Equity-A2.75729.513.28%12.45%-16.24%5.64%27.36%-41.19%-6.28%-7.22%11.98%
AGF European Equity Class3.10243.011.37%9.81%-20.50%-20.32%15.10%-36.58%-11.75%-22.11%-0.05%
Renaissance European2.808.810.34%8.09%-14.20%-5.44%12.07%-31.40%-5.53%-12.28%7.61%
HSBC European-I2.5534.310.17%9.21%-13.01%-3.83%15.31%-36.95%-7.01%-10.12%6.89%
CIBC European Equity2.64225.610.10%7.92%-7.13%-1.39%14.58%-24.33%-5.78%-4.30%11.34%
Bottom 8 Funds
IG Mackenzie Ivy European-A2.75245.33.50%2.52%0.65%0.05%7.48%-8.12%-1.80%4.56%6.41%
Mackenzie Ivy European Class2.5435.83.54%2.56%0.55%0.40%7.65%-8.17%-1.65%4.34%6.55%
Mackenzie Ivy European Fund*2.4887.83.68%2.69%0.56%-12.09%9.86%-37.41%-5.54%4.60%5.33%
Stone & Co. EuroPlus Div Growth A2.948.34.21%3.16%0.30%-6.62%13.10%1.47%7.12%
BMO GDN European AD Sr2.422.57.23%5.97%1.78%4.56%7.77%
BMO European2.4261.37.23%5.98%1.80%4.59%13.68%-39.45%-8.87%7.80%17.15%
CI European2.4537.67.23%6.88%-10.18%0.76%9.66%-41.50%-1.43%-7.55%7.07%
TD European Growth2.8241.67.87%6.96%-6.20%1.74%11.50%-33.99%-6.75%-2.08%10.69%
MSCI Europe ($ Cdn)7.75%-8.29%-0.96%16.18%-32.55%-2.98%-6.19%11.42%
S&P/TSX Total Return4.72%6.12%-8.71%17.61%35.06%-33.00%9.83%-8.15%19.17%
*Formerly known as Mackenzie Universal European Opportunities Fund until 2010 when the fund strategy and management changed.
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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