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A banner year for Europe-focused funds

What are we looking for?

The market sentiment toward European investments has significantly improved over the past year. We searched for the funds that performed best as economic uncertainty in the euro zone rattled many investors.

The screen

We looked for the top returns among European equity funds over one year to Nov. 30. U.S. dollar, segregated and duplicate version of the funds were excluded. We also omitted funds catering to one professional group, and those with a minimum investment of more than $25,000.

What did we find?

European-focused funds had a great year, but there are still opportunities to be found in the euro zone.

The long-term focused Chou Europe fund comes out on top with a gain of 51 per cent, followed by the Dynamic European Value Series A, which posted a 44-per-cent increase.

The Dynamic fund attributed its success to investments it began making as far back as two years ago. The fund was searching for multinational companies that were leaders in their sectors, portfolio manager Chuk Wong said. These firms were trading at a discount compared to their global peers because of the euro crisis, but the companies themselves weren't overly dependent on the region for profits. Mr. Wong called them "global champions."

The fund also began to invest in European financial companies such as BNP Paribas SA in France and Lloyds Banking Group PLC bank in Britain. "Yes, there were problems and issues with respect to the balance sheets, but we saw the banks restructure and recapitalize and initiate cost reductions," he said. He still thinks these banks are good investments. Since the rest of the world is getting more comfortable with investing in Europe, Mr. Wong has modified his strategy. Dynamic looks to allocate more funds to companies in the "periphery economies" in Europe, sometimes called PIIGS (for Portugal, Italy, Ireland, Greece and Spain).

"We are also investing a bit more in mid-caps," Mr. Wong said. "The blue chips have done well, so in my opinion they're now more or less fully valued."

For new opportunities next year, Mr. Wong suggests looking at domestic and regional-focused companies that can capitalize on the turnaround in the recovering European countries.

"We see the European economies stabilizing, and hopefully normalizing, some time in 2014," Mr. Wong said.



Assetsto Nov. 30Calendar Year Returns
FundMER(in $mil.)1 year3 years5 years10 years2012201120102009
Chou Europe Series A0.2517.151.00%21.49%19.23%4.68%31.73%-4.90%-0.85%34.70%
Dynamic European Value Series A2.51106.144.25%10.95%13.69%4.46%36.44%-30.26%11.08%28.68%
AGF European Equity Class3.1260.941.47%9.95%3.66%1.99%19.15%-20.50%-20.32%15.10%
RBC European Equity Srs A2.252875.535.08%13.19%8.58%3.62%18.72%-11.41%0.44%9.24%
Trimark Europlus Series A2.98240.235.06%17.51%13.53%6.88%20.30%-2.07%7.44%4.91%
TD European Index1.0472.233.42%12.49%9.67%4.92%16.49%-9.52%-2.01%12.42%
HSBC European-I2.4341.733.25%11.98%8.59%3.53%16.94%-13.01%-3.83%15.31%
CIBC European Index1.2151.36332.07%11.91%9.11%4.77%16.47%-10.21%-1.40%11.42%
Standard Life European Equity A2.442340.731.33%15.10%11.48%4.15%20.49%-7.00%-1.52%16.66%
Fidelity Europe-B2.4188.431.16%13.13%11.46%7.56%25.08%-14.02%6.46%10.50%
Scotia European Series A2.6921.730.81%15.60%11.27%4.24%19.24%-4.50%2.48%10.48%
Invesco European Growth Class2.9545.229.85%13.51%12.25%6.24%16.95%-5.69%5.07%15.98%
Investors Euro MidCap Eq Srs A2.72884.929.62%11.90%12.11%7.15%24.07%-16.24%5.64%27.36%
Stone & Co. EuroPlus Div Growth A3.0712.929.15%14.38%9.79%15.12%0.30%-6.62%13.10%
TD European Growth2.8247.828.83%12.45%10.31%3.99%16.20%-6.20%1.74%11.50%
S&P/TSX Total Return12.95%4.11%10.89%8.27%7.19%-8.71%17.61%35.06%
MSCI Europe ($ Cdn)35.00%13.89%11.16%6.30%17.27%-8.29%-0.96%16.18%
S&P 500 Composite Total Return Idx($Cdn)35.90%18.09%13.50%5.30%13.48%4.41%9.34%8.08%
Source: Lipper

© 2007 The Globe and Mail. All rights reserved.

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