Asset managers return to European equities

UK-based asset manager Schroders has launched ISF European Total Return, one of the latest vehicles set up to tap into potentially lucrative European equity markets.

The Schroder ISF European Total Return fund aims to provide investors access to long-term capital growth while using derivatives and other instruments to lower the targeted volatility of those returns.

The fund will be managed by Nicholette MacDonald-Brown, senior portfolio manager on the European equities team.

MacDonald-Brown will carry out fundamental stock selection (40 to 60 stocks) while attempting to lower volatility by adjusting the fund’s exposure to the market through the tactical use of cash, futures and derivatives.

According to Rory Bateman, head of European equities at Schroders, the group has seen increasing demand for a European equities product with the ability to limit non-stock specific risk given the volatility across European markets.

French group Edmond de Rothschild Asset Management also demonstrated its faith in European equities having launched EdR Euro Convictions in early February. This fund invests in eurozone equities selected from the group’s four European strategies.

The fund’s manager, Olivier Huet, admitted it was “a bit contrarian” to launch this fund while the eurozone crisis continues to affect equity valuations but said “maybe the crisis is slowly beginning to settle – valuations could quickly see a correction and risk premiums could be reduced on a global basis.”

Meanwhile Swedish group Skandia recently said it expected a “wall of money” to flow back into equity funds in 2012.

However, Blackrock’s exchange-traded funds arm iShares recently warned European markets “are cheap for a reason” and advocated investing primarily in northern Europe.

“With the European crisis dragging on and Europe likely to experience at least a mild recession this year, stocks in the region have become very cheap. We still, however, continue to hold a neutral view of the region overall and to advocate avoiding large parts of Europe — particularly Spain and Italy.

“We do like some countries in the economically stable northern region of the continent. Much of northern Europe arguably represents a good value for long-term investors when you consider these countries’ current valuations, relative growth prospects and perceived risk. As such, we continue to hold overweight views of Germany and the Netherlands, and we have initiated an overweight view of Norway and a neutral view of Sweden,” iShares said.

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