Fund of the Month February 2020

The latest fund tip, hand-picked by our Investment Guidance team.

Article updated: 3 February 2020 9:00am Author: Tom Rosser

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Our Fund of the Month for February is Marlborough European Multi-Cap (income.)

With all the talk of Brexit and UK markets; as investors we mustn’t forget about the other party in this quandary – Europe. European equities have generally been performing better of late after a difficult run of relative underperformance, yet they still remain very out of favour and offer contrarian appeal.

Reasons to buy:

  • Lead Manager David Walton is highly rated and has been managing European small companies for over 25 years.
  • Smaller companies are often overlooked and generally have the potential to outperform over the long run.
  • The team look for companies which can grow their earnings without relying on the tailwind of a strong economic backdrop, helping to reduce any fallout from Brexit.

Things to be wary of

  • Typically, smaller and micro-cap companies are more volatile so holding a fund such as this over the long term is important.
  • The fund has relatively high exposure to cyclical sectors, such as Industrials and Consumer Discretionary, which can be hit the hardest in market sell-offs.
  • There is an element of key man risk as David Walton brings a wealth of experience to the team, however Deputy Manager Will Searle has worked alongside him for a number of years.

About the fund

Marlborough European Multi-Cap seeks to increase the value of your investment by primarily investing in smaller companies from mainland Europe. It does have the ability to invest in European businesses of all sizes but manager, David Walton, employs a stronger focus on smaller companies due to the belief they are often overlooked and hence tend to often outperform over the long run. He has been managing European small-caps (capitalisation – which is the total market size of a company’s outstanding shares of stock) for over 25 years and is highly regarded in terms of stock picking ability and skill in mitigating risks typically associated with smaller companies.

Although the fund aims to benefit from any economic opportunities arising, it predominately focuses on picking stocks based on their own individual merits. The kind of companies David and Deputy Manager Will Searle look for are those with; strong management, notable growth prospects and a share price which isn’t fully representative of its potential.

Portfolio Positioning and Performance

The portfolio has a relatively large number of holdings resulting in it being well-diversified – meaning it is not overly exposed to one particular risk factor, which helps to reduce overall risk. This is also apparent at a country and sector level as the fund has broad exposure across both. As a result, the fund scores very well in terms of volatility (variation in a fund’s returns) over both three and five years, when compared to peers from the same sector.

In terms of performance the fund also scores well, having delivered very strong returns over the long term (5+ years). It currently ranks first in the sector over 5 years, beating its closest rival by around 15% with a return in excess of 120%. Couple this with the low levels of risk taken and the fund has also produced superior risk-adjusted returns compared to the IA Europe Excluding UK sector. Overall, the team’s expertise in small-cap investing and exposure to a diversified set of domestically-focused companies should allow strong returns to continue being delivered over the long-term.

Risk rating M6


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Tom Rosser

Investment Research Analyst

Tom holds a BSc Economics degree and an MSc Investment Management degree, and has passed both CFA Level l and CFA Level ll. He joined The Share Centre in September 2018 on the graduate scheme and is now an Investment Research Analyst on the fund research team. As well as being a fund commentator, Tom also comments across equities and other asset classes.

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