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Value Line’s European Equity objective group is comprised of mutual funds that are mandated to invest at least 50% of their net assets in equity securities of European companies, though most typically have more than that amount invested in the region. The funds in this category normally have a broad focus, without highlighting any specific country within Europe. There are, of course, a select number of funds, such as Fidelity Nordic Fund (FNORX), that break this mold. Differentiation on the objective level is mostly on the market cap focus, and there are several European equity funds that invest in small-company stocks (Invesco European Small Company A, ESMAX). 

Thus, most of the European Equity funds Value Line covers are “generalist” in nature, with the latitude to own both growth and value investments across the market capitalization spectrum from small to large. That said, each management team has its own focus, so there are clear differentiating factors among the funds about which investors need to be aware. As usual, funds that follow an index approach are also available, including Vanguard European Stock Index Fund (VESSX).

Although Europe is relatively small compared to other geographical areas in terms of size, its historical and ongoing significance is outsized relative to some of the larger, but often less developed, continents and countries. Also of interest is the diversity of nations that make up Europe.  Indeed, Europe is very different from the United States, in that each country there has its own distinct legal, political, and social systems—while each state in the United States is roughly indistinguishable in those respects. This is important to understand, as the distinctions can lead to many complications on the investing front. It is also why expense ratios for funds in this objective group are often higher than for domestic-focused ones. Another factor to consider here is the use of hedging to offset exchange rate fluctuations; depending on where one believes the price of the dollar is going, this practice can be viewed as good or bad. 

Over the long term, the European Equity objective group has been an above-average performer relative to the markets of developed economies around the world, as measured by the MSCI WORLD Index. For the 10-year period ended August 30, 2013, the group had an annualized return of 8.2%, while the MSCI WORLD Index gained at an annualized rate of 5.6%. For the five- and three-year periods through August, the group had a gain of 2.3% and a gain of 10.6%, respectively, while the Index reported an annualized gain of 1.8% and a gain of 10.9%, respectively. During the past year, the European Equity group reported a gain of 19.9% compared with a gain of 15.1% for the MSCI WORLD Index. Year to date through August 30, 2013, however, the European Equity objective group has almost kept pace with the MSCI WORLD Index, reporting a gain of 8.6% versus a gain of 10.0%, respectively. Indeed, almost all funds in the group have rebounded from earlier lows, with all but a few reporting year-to-date returns that are in the black. The group has a Risk Rank of 4, indicating that funds in this group might not appeal to risk-averse investors. That said, there is a benefit to geographically diversifying investments. 


Fund Name: Putnam Europe Equity Fund A
Ticker: PEUGX
Year-to-Date Return: 12.76%
Investment Advisor: Putnam Investment Management, LLC
Benchmark: MSCI Europe Index
Objective: The Fund seeks capital appreciation.
Investment Strategy:
• Invests mainly in common stocks (growth or value stocks or both) of large and midsize European companies.
• Invests mainly in developed countries, but may invest in emerging markets, such as those in Eastern Europe.
• May consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows, and dividends when deciding whether to buy or sell investments.
• May also use derivatives, such as futures, options, certain foreign currency transactions, warrants and swap contracts, for both hedging and non-hedging purposes.

Fund Name: Mutual European Fund A
Ticker:TEMIX
Year-to-Date Return: 12.41%
Investment Advisor: Franklin Mutual Advisers, LLC (Franklin Mutual)
Benchmark: MSCI Europe Index
Objective: The Fund seeks capital appreciation, which may occasionally be short term. The secondary goal is income.
Investment Strategy:
• Invests at least 80% of its net assets in securities of European companies that are available at market prices less than their value based on certain recognized or objective criteria.
• Invests primarily in undervalued equity securities.
• Normally invests in securities from at least five different countries, it may invest all of its assets in a single country.
• Also may invest up to 20% of its total assets in securities of US issuers and the issuers from the Middle East and remaining regions of the world, including emerging markets.

Fund Name: Columbia European Equity Fund A
Ticker: AXEAX
Year-to-Date Return: 11.17%
Investment Advisor: Columbia Management Investment Advisers, LLC
Benchmark: MSCI Europe Index
Objective: The Fund seeks to provide shareholders with capital appreciation.
Investment Strategy:
• Primarily invests in equity securities of European companies that are belived to offer growth potential.
• Invests at least 80% of its net assets in equity securities of European companies (generally include common stocks, preferred stocks, securities convertible into US common stocks, US dollar-denominated American Depositary Receipts and US dollar denominated foreign stocks traded on US exchanges.
• Also may invest in securities of companies located developing or emerging markets.

In the table below, we have listed 10 top-performing funds through August 30, 2013 that we follow in our Fund Advisor database.

 

10 Top European Equity Funds Performance 

 

Fund Name 

Ticker 

% Year-to-date 

Total Return 

% 1 Month 

Total 

Return 

% 3  

Month 

Total 

Return 

% 6 Month 

Total  

Return 

% 5 Year 

Total 

Return 

Annualized 

Fidelity Nordic Fund 

FNORX 

20.25 

0.13 

4.32 

10.77 

3.78  

  

Invesco European Small Company Fund A 

ESMAX 

17.39 

0.89 

6.10 

10.87 

7.81 

T. Rowe Price European Stock Fund 

PRESX 

14.53 

-1.66 

3.61 

9.93 

5.72 

JPMorgan Intrepid European Fund A 

VEUAX 

13.13 

-2.69 

2.21 

9.70 

2.40 

Putnam Europe Equity Fund A 

PEUGX 

12.76 

-1.96 

2.72 

9.75 

3.49 

Mutual European Fund A 

TEMIX 

12.41 

-0.73 

2.19 

8.28 

4.30 

Henderson European Focus Fund A 

HFEAX 

12.29 

0.68 

6.94 

14.38 

8.40 

Columbia European Equity Fund A  

AXEAX 

11.17 

-2.55 

2.84 

8.88 

6.21 

MFS European Equity Fund A 

MEEAX 

10.03 

-0.78 

2.50 

7.52 

  

BlackRock EuroFund Fund A 

MDEFX 

9.64 

-0.91 

1.73 

7.88 

1.19 

European Equity Objective Group 

  

8.60 

-1.38 

7.73 

5.95 

2.30 

  

At the time of this article's writing, the authors did not have positions in any of the funds mentioned.