SICAV

Continental European Equity Fund

Style-agnostic, quality-driven European equity investment.

ISIN LU0938199691 WKN A1W82V

3YR Return Annualised
(View Total Returns)

Total Assets
(EUR)

6.44%
€145.3m

1YR Return
(View Total Returns)

Manager Tenure

7.24%
<1yr

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.61
3.15%

Inception Date 24-May-2013

Performance figures calculated in GBP

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30-Sep-2020 - Tobias Mueller, Portfolio Manager ,
The path of economic recovery from here remains unclear, not least due to the uncertainties around a second wave of coronavirus infections and the timing and efficacy of any vaccines. But our perceptions of fundamentals, including policy developments, and what is being discounted by markets are encouraging us to increase our exposure to cyclical stocks for the medium term as we look for those higher-quality opportunities where we have deep insights.
Tobias Mueller, CFA
Tobias Mueller, CFA, Portfolio Manager

Tobias Mueller is the portfolio manager for the European Select Strategy, effective October 2018. Previously, he covered the technology, medical technology and exchange sectors as a research analyst in the Equity Division. Mr. Mueller is a vice president of T. Rowe Price International Ltd.

 

Strategy

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a diversified portfolio of stocks of companies in Europe (excluding the UK).

Investment Approach

  • Fundamental research is critical to successfully identify and assess long-term investment opportunities. We look for companies with high returns on capital and capable of providing sustainable earnings across the market cycle.
  • Style agnostic, focus on quality. By avoiding style constraints, we can invest in quality companies and maintain a balanced portfolio through market cycles.
  • Disciplined approach to valuation. We aim to buy businesses at a clear discount to their intrinsic value.
  • Risk management is essential and is assisted by diversification, quantitative analysis, and automatic stabilizers built in to our investment process.

Portfolio Construction

  • Typically 40-70 stocks
  • Individual position size up to 4.0% relative to the indicative benchmark
  • Sector ranges: typically +/- 10% relative to the indicative benchmark
  • Country ranges: typically +/- 10% relative to the indicative benchmark
  • Expected Tracking Error: typically 3.0% to 6.0%
  • Information Ratio objective: >0.5
  • Cash target range: fully invested, typically less than 5.0%
  • Turnover range: 40%-100%

Performance (Class Q | GBP)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 7.24% 6.44% 11.28% 9.65%
Indicative Benchmark % 0.03% 2.30% 9.34% 7.06%
Excess Return % 7.21% 4.14% 1.94% 2.59%

Inception Date 24-May-2013

Indicative Benchmark: FTSE Developed Europe ex United Kingdom Index Net

Data as of  30-Sep-2020

Performance figures calculated in GBP

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 7.24% 6.44% 11.28% 9.65%
Indicative Benchmark % 0.03% 2.30% 9.34% 7.06%
Excess Return % 7.21% 4.14% 1.94% 2.59%

Inception Date 24-May-2013

Indicative Benchmark: FTSE Developed Europe ex United Kingdom Index Net

Data as of  30-Sep-2020

Performance figures calculated in GBP

Recent Performance

  Month to DateData as of 23-Oct-2020 Quarter to DateData as of 23-Oct-2020 Year to DateData as of 23-Oct-2020 1 MonthData as of 30-Sep-2020 3 MonthsData as of 30-Sep-2020
Fund % 0.41% 0.41% 5.95% 1.60% 4.68%
Indicative Benchmark % 0.61% 0.61% -0.23% 0.65% 1.47%
Excess Return % -0.20% -0.20% 6.18% 0.95% 3.21%

Inception Date 24-May-2013

Indicative Benchmark: FTSE Developed Europe ex United Kingdom Index Net

Indicative Benchmark: FTSE Developed Europe ex United Kingdom Index Net

Performance figures calculated in GBP

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Index returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 June 2019, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly.

30-Sep-2020 - Tobias Mueller, Portfolio Manager ,
The FTSE All-World Developed Europe ex UK Index fell in volatile trade in September on concerns that a second wave of novel coronavirus infections could derail a nascent economic recovery. Signs that the next round of U.S. fiscal stimulus could be delayed until after the presidential election also weighed on sentiment. At the portfolio level, the main contributors were an underweight allocation and stock selection in energy; stock picking and a modest underweight exposure to financials; and our choice of securities in information technology. On the negative side, stock selection in materials and industrial and business services were a modest drag. Our only holding in the energy sector, Netherlands-based Koninklijke Vopak, the world’s largest tank terminal operator, made a modest positive contribution. The shares rose on the acquisition of three Dow Inc. industrial terminals, with underlying long-term service contracts. However, in materials, Verallia, Europe’s largest maker of glass containers, eroded performance as the coronavirus spread across the continent again, disrupting factory operations and distribution, and stifling demand.

Holdings

Total
Holdings
63
Largest Holding Roche Holding 4.36% Was (30-Jun-2020) 4.49%
Other View Full Holdings Quarterly data as of 30-Sep-2020
Top 10 Holdings 29.26% View Top 10 Holdings Monthly data as of 30-Sep-2020

Largest Top Contributor^

Zalando
By 0.88%
% of fund 3.00%

Largest Top Detractor^

Roche Holding
By -0.97%
% of fund 4.33%

^Absolute

Quarterly Data as of 30-Sep-2020

Top Purchase

SAP
2.97%
Was (30-Jun-2020) 0.08%

Top Sale

Nestle (E)
0.00%
Was (30-Jun-2020) 4.00%

Quarterly Data as of 30-Sep-2020

30-Jun-2020 - Dean Tenerelli, Portfolio Manager ,

Increased Overweight in Industrials

Portfolio Manager Dean Tenerelli continued to adopt a measured, stock-by-stock appraisal of opportunities identified by the broader analyst team and by revisiting companies he has known for many years that are trading once again at fundamentally attractive levels. Long experience tells him that even when a company meets his quality criteria, it pays to be patient if the valuation does not appear attractive. He is prepared to wait and monitor the share price until it moves into the right area. This happened in many cases following the correction in March, but the market rebound meant that opportunities grew scarcer as the quarter progressed. This resulted in a more moderate level of portfolio activity compared with the first quarter.

  • We added two new names to the portfolio during the quarter and exited three.�
  • We raised our overweight position in industrials and business services, our biggest exposure, adding Flughafen Zurich.
  • We increased our overweight in consumer discretionary, adding to Prada.
  • We moved from a neutral to an underweight allocation to health care at the start of the quarter, paring Getinge.
  • We further reduced our exposure to IT, exiting Capgemini, although we also initiated a position in SAP.
  • We deepened our financials underweight, exiting BNP Paribas.

Industrials and Business Services

We adjusted our holdings in industrials and business services, increasing our overweight, which is our largest sector exposure in absolute and relative terms. We added Flughafen Zurich, Switzerland's largest airport, and we exited Konecranes, a Finland-based industrial cranes manufacturer. We continue to invest in high-quality businesses with strong industry positions and durable earnings that are now more realistically valued when these opportunities arise.

In terms of industry, our largest overweights are in machinery and electrical equipment. In the former, our largest investments are GEA Group, which provides process technology and components for the food processing industry worldwide, and Epiroc, a leading provider of products, solutions, and services to the global mining and infrastructure markets. In the latter, we own the shares of Schneider Electric, a global specialist in energy management and automation, and Prysmian, the world's largest global telecommunications cable manufacturer. We are also now overweight in transportation infrastructure and in commercial services and supplies due to our new investments.

  • We initiated a position in Flughafen Zurich. While the outlook for traffic and volumes is subdued, we do not expect a material hit on earnings from the coronavirus outbreak over the medium term.
  • We exited our position in Konecranes. The industrial cranes market was already weak going into 2020, and it is now likely that this late cyclical market will recover even later as global industrial production is reduced further by the coronavirus crisis. Konecranes also withdrew its guidance for 2020 and began cost-cutting, laying off its workforce in Finland.

Consumer Discretionary

We raised our overweight allocation to consumer discretionary, adding to Prada, a leading global luxury goods company.

We reduced our underweight to the textiles, apparel, and luxury goods industry by adding to Prada. We also have a sizable investment in EssilorLuxottica, the world's leading eyewear company, which would normally benefit from structural growth in developed markets and has significant expansion potential in emerging markets.

Our largest overweight is in household durables, where we own de Longhi, an Italian company that designs, produces, and markets products for home and business comforts, and SEB, a France-based household equipment manufacturer that has leading global brands that are coping resiliently amid slowing economic growth. We also have a position in Husqvarna, a Sweden-based company that makes and markets outdoor power and consumer watering products, cutting equipment, and diamond tools for the construction and stone industries.

We own the shares of Zalando, Europe's largest online retailer, as well. This gives us an exposure to internet retailing, a fast-growing, disruptive industry.

While we are no longer exposed directly to the automobile industry, we still own shares in auto components company Autoliv, a best-in-class supplier of automotive safety systems, and Brembo, a high-quality family-owned auto supplier that makes braking systems, which we believe will be largely immune to the electrification trends.�

Health Care

We moved from a neutral to an underweight allocation to health care at the start of the quarter after strong performance fueled mainly by coronavirus-related demand. We pared our holding in Getinge, a Swedish medical technology company that is a leading provider of surgical products and operating room supplies.

We have a sizable position in pharmaceuticals, which includes Switzerland-based Roche Holding; Novartis, a Swiss manufacturer of health care and nutritional products; Novo-Nordisk, a Danish pharmaceutical company that develops, manufactures, and distributes health care products; and France-based Sanofi. We also hold Grifols, a Spain-based company engaged in the manufacture of biopharmaceuticals, which is expanding in China.

Information Technology

We deepened our underweight in IT, exiting Capgemini, a leading global management consulting, outsourcing, and professional services company, although we also initiated a position in SAP, a leading enterprise software vendor.

  • We sold our holding in Capgemini. While revenue generation has become more resilient since the 2009 crisis, we believe the outlook for the company's earnings is less favorable as clients in the IT sector are likely to cut consulting services during the looming recession.

Financials

We deepened our underweight in financials, exiting BNP Paribas, a leading French bank in the eurozone. We believe it is likely to struggle in a recessionary environment where interest rates will stay lower for longer.

We are otherwise overweight banks, with positions in Julius Baer, a Swiss private bank and asset manager; Nordea Abp, the largest Nordic financial services provider; and Bawag, Austria's fourth-largest lender.

Many banks are trading at historically low valuations amid weak demand for loans, persistently low interest rates, and a stringent regulatory environment. However, we remain cautious because the industry remains challenged by slower economic growth, poor return on equity, and low capital generation. Consequently, our focus is on better-quality names, typically in more consolidated markets, resulting in a relatively more resilient return on equity. Some of our investments also have the potential to improve returns due to self-help initiatives, such as Nordea.

One common theme is an objective to generate more defensive and sustainable returns from fee income, as opposed to lending or trading activities. Our investments include Spanish lender Bankinter, one of the best capitalized in Europe; Finecobank Banca Fineco, a diversified financial institution in Italy that attracts deposits through its online bank; and KBC, a leading Belgian bancassurer and financial company, which also has strong positions in central and Eastern Europe.

We have a neutral allocation to insurance, where our investments are mainly determined by our stock-specific approach. We added to Munich Re, a large, high-quality global reinsurer with a sizable primary insurance business, on share price weakness; it is now our main holding. We also own stock in Germany-based Allianz, a leading global insurer and asset manager, and Zurich Insurance, which spans Europe, Latin America, North America, and Asia. The company is on a path of increasing return on capital, which we expect to gain momentum under a new plan to streamline the group's operations.

Sectors

Total
Sectors
11
Largest Sector Industrials & Business Services 18.73% Was (31-Aug-2020) 18.86%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2020

Indicative Benchmark: FTSE Developed Europe ex United Kingdom Index

Top Contributor^

Consumer Discretionary
Net Contribution 1.49%
Sector
0.50%
Selection 0.99%

Top Detractor^

Information Technology
Net Contribution -0.16%
Sector
-0.10%
Selection
-0.07%

^Relative

Quarterly Data as of 30-Sep-2020

Largest Overweight

Consumer Discretionary
By5.88%
Fund 16.76%
Indicative Benchmark 10.88%

Largest Underweight

Consumer Staples
By-7.42%
Fund 5.43%
Indicative Benchmark 12.85%

Monthly Data as of 30-Sep-2020

30-Sep-2020 - Tobias Mueller, Portfolio Manager ,
Most of the intended changes to the portfolios have now been implemented and Tobias Mueller is on course to take over as sole portfolio manager from October 1. We adjusted our utilities holdings, and now have a smaller underweight allocation. We initiated a position in a Spanish energy company at the forefront of Europe’s transition to a greener economy emphasising renewable energy, which should also drive long-term growth prospects. We substantially reduced our overweight in consumer discretionary, although it is still one of our largest exposures, exiting Autoliv an automobile components provider. In our view, the continuing coronavirus pandemic points to a slower economic recovery that is likely to dampen demand.

Countries

Total
Countries
12
Largest Country Germany 22.32% Was (31-Aug-2020) 21.89%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2020

Indicative Benchmark: FTSE Developed Europe ex United Kingdom Index

Top Contributor^

Germany
Net Contribution 1.19%
Country
-0.02%
Selection 1.21%

Top Detractor^

Switzerland
Net Contribution -0.42%
Country
0.07%
Selection
-0.49%

^Relative

Quarterly Data as of 30-Sep-2020

Largest Overweight

Italy
By5.76%
Fund 10.40%
Indicative Benchmark 4.64%

Largest Underweight

France
By-9.20%
Fund 11.77%
Indicative Benchmark 20.96%

Monthly Data as of 30-Sep-2020

30-Sep-2019 - Dean Tenerelli, Portfolio Manager ,
We deepened our underweight allocation in consumer staples, the largest in the portfolio, by selling Essity Aktiebolag, a global hygiene products company, taking profits after a strong run. In our view, the margin-improvement thesis has largely played out and is factored into the share price. Raw material prices have also started to decline, and the company could find it more challenging to maintain price increases. Consequently, the shares may struggle to rise much further. In contrast, we increased our overweight exposure to industrial and business services, health care and real estate.

Team (As of 01-Oct-2020)

Tobias Mueller, CFA

Tobias Mueller is the portfolio manager for the European Select Strategy, effective October 2018. Previously, he covered the technology, medical technology and exchange sectors as a research analyst in the Equity Division. Mr. Mueller is a vice president of T. Rowe Price International Ltd.

Mr. Mueller has 13 years of investment experience, eight of which have been with T. Rowe Price. He completed an internship at the firm in 2010, and prior to joining T. Rowe Price in 2011, he worked at Lehman Brothers in the Principal Finance Group, London, where he focused on distressed fixed income assets.

Mr. Mueller has earned an M.B.A. from the University of Chicago Booth School of Business and is a graduate of business administration from the University of Applied Sciences in Munich, Germany. He also has earned the Chartered Financial Analyst designation.

  • Fund manager
    since
    2020
  • Years at
    T. Rowe Price
    9
  • Years investment
    experience
    14
Andrew Clifton

Andrew Clifton is a portfolio specialist in the Equity Division at T. Rowe Price. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

Mr. Clifton has over 30 years of investment experience, nine of which have been at T. Rowe Price. Prior to joining the firm in 2010, he was an executive director at UBS Global Asset Management. Prior to that, he was a vice president at Merrill Lynch.

Mr. Clifton earned a B.Sc. in economics from the London School of Economics and an M.Sc. in econometrics from the University of Southampton.

  • Years at
    T. Rowe Price
    10
  • Years investment
    experience
    31

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (EUR) Minimum Subsequent Investment (EUR) Minimum Redemption Amount (EUR) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class I €2,500,000 €100,000 €0 0.00% 65 basis points 0.75%
Class Q €1,000 €100 €100 0.00% 65 basis points 0.82%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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