Marlborough European Multi-Cap
1-year return: 8.8% | 3-year return: 83.1%
A significant cash weighing has taken the shine off performance at Marlborough European Multi-Cap in the past year, but the fund remains in the first quartile over three, five and 10 years. It ranks first, second and tenth top performer in the IA Europe sector over those timeframes.
The £394 million fund had almost 17 per cent of its assets in cash in April, amid significant inflows to the fund and equity market valuations that are elevated by historic standards. That means it has missed some recent equity market gains, but its cash holdings could prove a buffer against future volatility.
Although David Walton, the fund’s manager since 2013, and Will Searle, his deputy since 2017, can invest in companies of any size, they favour smaller companies – in keeping with many Marlborough funds. It is this bias that has supercharged performance in recent years. Smaller companies have been shown to significantly outperform large companies over time.
The fund also offers access to micro-capitalisation companies – much smaller companies than many of its peers. These businesses are often overlooked, tend to be more attractively valued than the household names, and hence have the potential to outperform. Walton says the improving economic picture is also likely to favour these stocks, which tend to be more focused on domestic markets. The managers look for undervalued stocks with above-average growth potential and strong management teams.
HIGHLY COMMENDED FUND
T Rowe Price European Smaller Companies
1-year return: 20.5% | 3-year return: 73%
Our highly commended fund, T Rowe Price European Smaller Companies, is a pan-European fund that consistently ranks in the first quartile. The £178 million fund is run by Ben Griffiths, who has 16 years of investment experience and specialised in small companies early in his career.
He joined T Rowe Price in 2006 as an analyst covering European smaller companies. He has co-managed this fund since 2008 and took the lead role in January 2016. Griffiths aims to identify long-term opportunities early in a company’s life.
He seeks high-quality companies with good capital allocation and high standards of corporate governance. His universe of stocks is not well-covered by analysts, giving him plenty of scope to find unloved and undervalued companies. Taking a long-term view enables him to stick with his winners. The fund has outperformed its sector average by 17.6 per cent over one year and 48.9 per cent over three. It has around 120 stocks with one third of assets invested in the UK.