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Mutual Fund News

For the brave investor, Europe beckons

swon@globeandmail.com

What are we looking for?

How European stock funds are navigating the region's debt woes and slowing economies.

Investors got some good news last summer when European Central Bank president Mario Draghi pledged to do whatever it takes to deal with the debt crisis. But more bad news reared its head recently when data indicated that the euro zone had slipped into a double-dip recession.

The screen

We looked at the best and worst returns among European equity funds for the first 10 months of this year.

U.S. dollar, segregated, pooled and duplicate versions of the funds were excluded.

What did we find?

For the brave, Europe has been decent place to make money this year.

Even most of the laggards among the European funds fared better than the Canadian stock market.

Dynamic European Value, which lost 30 per cent in 2011, emerged at the head of the pack with a 23.4-per-cent gain. Chou Europe and Fidelity Europe, followed closely with 19.1-per-cent and 18.7-per-cent returns, respectively.

The Dynamic fund suffered last year because it owned some financial stocks that took a big hit and mid-cap stocks that got sold off indiscriminately, says its portfolio manager Chuk Wong of GCIC Ltd.

The contrarian investor, who had raised cash to 12 per cent by the end of 2011, has pared down that position to 2 per cent by snapping up bargain stocks.

The fund's winners this year have included global companies such as Duerr AG, a supplier of equipment for auto plant paintshops, and Spectris PLC, a maker of production-testing gear. Rebounding financials such as BNP Paribas SA and Lloyds Banking Group PLC, as well as emerging market plays like Turkey's Garanti Bank and airline Turk Hava Yollari, have also helped peformance.

Whitbread PLC, which runs budget hotels and the Costa coffee chain, has had a nice run too.

Even though Europe's economy continues to be weak, it's still possible to make money from stocks of companies with customers around the world, Mr. Wong said. "We also know that the banking system has a lot of issues, but it doesn't mean every single bank is in trouble ... Lloyds is a turnaround story, and BNP Paribas is the best bank in France."

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HOW EUROPEAN EQUITY FUNDS HAVE FARED THIS YEAR TO OCT. 31

Fund nameMERAssets ($-mil)YTD % return (Oct. 31)YTD % return (Nov. 22)2011 % rtn2010 % rtn2009 % rtn2008 % rtn2007 % rtn
Leaders
Dynamic European Value2.4939.423.3%25.2%-30.3%11.1%28.7%-38.3%-19.3%
Chou Europe1.947.319.1%N/A-4.9%-0.9%34.7%-44.0%-15.1%
Fidelity Europe-B2.38156.118.7%18.6%-14.0%6.5%10.5%-36.8%18.5%
Investors Euro Mid-Cap Equity-A2.75714.618.2%17.1%-16.2%5.6%27.4%-41.2%-6.3%
BMO European2.50444.517.3%18.5%1.8%4.6%13.7%-39.4%-8.9%
BMO GDN European Advisor Series2.522.817.3%18.5%1.8%4.6%
Renaissance European2.798.115.7%15.6%-14.2%-5.4%12.1%-31.4%-5.5%
Scotia European2.6917.015.3%14.4%-4.5%2.5%10.5%-38.1%-7.6%
Laggards
IG Mackenzie Ivy European-A2.75253.65.8%4.5%0.6%0.1%7.5%-8.1%-1.8%
Mackenzie Ivy European Class2.6332.75.9%4.7%0.5%0.4%7.6%-8.2%-1.7%
Mackenzie Ivy European Fund2.5879.06.1%5.0%0.6%-12.1%9.9%-37.4%-5.5%
Altamira European Equity2.4526.07.4%9.7%-10.1%0.9%7.7%-37.2%-4.1%
Investors European Dividend Growth A2.7335.08.3%8.6%-9.9%-4.5%12.3%-38.4%
Investors European Equity-A2.75671.49.5%9.7%-11.4%-3.6%11.2%-33.6%-3.4%
AGF European Equity Class3.10200.710.2%11.0%-20.5%-20.3%15.1%-36.6%-11.7%
TD European Index1.0246.010.3%10.1%-9.5%-2.0%12.4%-32.2%-4.2%
Indexes
MSCI Europe ($ Cdn)11.6%11.2%-8.3%-1.0%16.2%-32.6%-3.0%
S&P/TSX Total Return6.5%4.3%-8.7%17.6%35.1%-33.0%9.8%
S&P 500 Composite Total Return Idx($Cdn)12.3%10.6%4.4%9.4%8.1%-21.9%-10.5%
Source: Lipper, Bloomberg

© 2007 The Globe and Mail. All rights reserved.

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