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SICAV

Continental European Equity Fund

Style-agnostic, quality-driven European equity investment.

ISIN LU1225514311 Bloomberg TRPEXQU:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(EUR)

13.77%
€151.6m

1YR Return
(View Total Returns)

Manager Tenure

32.34%
4yrs

Information Ratio
(3 Years)

Tracking Error
(3 Years)

0.72
6.75%

Inception Date 04-May-2015

Performance figures calculated in USD

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31-Dec-2019 - Dean Tenerelli, Portfolio Manager,
The European equity market rally in 2019 masked bouts of shifting sentiment and direction caused by uncertainty surrounding trade, economic fundamentals, and central bank intentions. Stocks may struggle to advance further and markets may remain volatile without further resolution of issues that lie at the root of this uncertainty. Valuations are around their historical averages, and our conservative valuation approach is challenged to find many higher-quality opportunities that appear to offer meaningful absolute upside to current levels.
Dean Tenerelli
Dean Tenerelli, Portfolio Manager

Dean Tenerelli is portfolio manager in the Equity Division at T. Rowe Price. He manages the Europe Equity Strategy, a position he has held since October 2005, and is chairman of its Investment Advisory Committee. He is a vice president of T. Rowe Price Group, Inc. and 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 Qh | USD)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 32.34% 13.77% N/A 7.88%
Indicative Benchmark % 31.13% 8.92% N/A 6.46%
Excess Return % 1.21% 4.85% N/A 1.42%

Inception Date 04-May-2015

Indicative Benchmark: FTSE Developed Europe ex UK 100% Hedged to USD Net Tax Index

Data as of  31-Dec-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 32.34% 13.77% N/A 7.88%
Indicative Benchmark % 31.13% 8.92% N/A 6.46%
Excess Return % 1.21% 4.85% N/A 1.42%

Inception Date 04-May-2015

Indicative Benchmark: FTSE Developed Europe ex UK 100% Hedged to USD Net Tax Index

Data as of  31-Dec-2019

Performance figures calculated in USD

Recent Performance

  Month to Date Quarter to Date Year to Date 1 MonthData as of 31-Dec-2019 3 MonthsData as of 31-Dec-2019
Fund % N/A N/A N/A 1.35% 6.43%
Indicative Benchmark % N/A N/A N/A -0.59% 2.63%
Excess Return % N/A N/A N/A 1.94% 3.80%

Inception Date 04-May-2015

Indicative Benchmark: FTSE Developed Europe ex UK 100% Hedged to USD Net Tax Index

Indicative Benchmark: FTSE Developed Europe ex UK 100% Hedged to USD Net Tax Index

Performance figures calculated in USD

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.

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.

31-Dec-2019 - Dean Tenerelli, Portfolio Manager,
The FTSE All-World Developed Europe x UK Index rose to a fresh record level in December on optimism around trade and waning fears of a global recession. Within the portfolio, utilities, consumer discretionary and financials underperformed due mainly to negative stock selection. Conversely, stock selection in communication services was the main positive contributor. Our choice of securities in health care also helped, as did our stock picking and underweight allocations to consumer staples and information technology. Within utilities, our positions in Italy-based Hera, which operates in the waste, water, gas and electricity segments, and Italgas, the country's largest natural gas distributor, weighed on returns. The two stocks weakened in sympathy with Italian stocks, which fell at the beginning of the month amid signs of further tension between the government and the European Union, this time due to disagreement with proposed reforms to the eurozone bailout fund. Conversely, Scout24 Holding, a Germany-based online classified advertising firm was the best-performing stock in communication services. Scout24 climbed to a record level after it sold AutoScout24, Europe’s largest online market place for cars, and the Finanzcheck business for a premium price of EUR €2.9 billion.

Holdings

Total
Holdings
53
Largest Holding Roche Holding 6.35% Was (30-Sep-2019) 6.15%
Other View Full Holdings Quarterly data as of 31-Dec-2019
Top 10 Holdings 33.87% View Top 10 Holdings Monthly data as of 31-Dec-2019

Largest Top Contributor^

Roche Holding
By 3.20%
% of fund 6.33%

Largest Top Detractor^

Nestle
By -2.55%
% of fund 4.36%

^Absolute

Quarterly Data as of 31-Dec-2019

Top Purchase

Cia De Distribucion Integral Logista (N)
1.79%
Was (30-Sep-2019) 0.00%

Top Sale

EssilorLuxottica
1.21%
Was (30-Sep-2019) 2.85%

Quarterly Data as of 31-Dec-2019

30-Sep-2019 - Dean Tenerelli, Portfolio Manager,

Cyclical and Defensive Opportunities Continued to Emerge

A wider variety of opportunities that we could exploit continued to emerge as macroeconomic conditions became more challenging and markets more prone to sudden shifts in sentiment. Once again, there was a mix of high-quality defensive and cyclical names with durable earnings and strong balance sheets that became more attractively valued as market volatility continued into the third quarter.

  • We added to industrials and business services, moving back to a modest overweight, and continued to adjust our bank holdings, seeking high-quality names that are liquid, are strong, and earn a diversified income.
  • While we raised our exposure to real estate to a modest overweight, we deepened our large underweight in consumer staples, where most names now look expensive.
  • We seek a relatively balanced portfolio in terms of exposures to possible economic scenarios, so that relative performance is not dependent on a particular "macro" environment.

Financials

We remain underweight financials as the outlook remains difficult, although valuations have become more attractive, especially for banks. We increased our overweight in insurance, investing in Sampo, a Finnish insurance company. We pared our underweight in banks, opening positions in Bankinter, a high-quality Spanish lender and asset manager; FinecoBank Banca, an Italian diversified financial institution that attracts deposits through its online bank; and Nordea Bank, the largest financial services provider in the Nordic region.

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 slowing 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.

Several of our investments also have the potential to improve returns due to self-help initiatives. 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 France's BNP Paribas and KBC, a leading Belgian bancassurer and financial company, which also has strong positions in central and Eastern Europe.

  • Bankinter is among the best-capitalized banks in Europe, has a history of strong risk management, and is committed to a high payout ratio. Earnings are also bolstered by fee income from its asset management business, which means Bankinter is better able to reduce the impact of net interest margin erosion in the current prolonged low interest rate environment.
  • FinecoBank is gaining more operational independence to exploit its unique position in the Italian market, as UniCredit reduces its controlling stake, and the online lender is taking market share from struggling local banks.
  • We sold our shares in UBS, a wealth management, investment banking, and asset management company, because we believe slowing European economic growth and the prospect of an extended period of low interest rates are likely to curb earnings. Investment outflows have also picked up at UBS, and investment banking revenues have flagged.
  • We also exited our investment in Austrian lender Erste Banking Group because the European slowdown is likely to weigh on the performance of its markets in central and Eastern Europe.

Industrials and Business Services

We moved to a modest overweight in industrials and business services in order to be better placed to benefit from any positive impact on markets from a resolution to global trade disputes and an improvement in business confidence. We added to our holding in Gea, a high-quality German engineering conglomerate that is a leader in food processing equipment, and initiated a holding in Sandvik, a Swedish engineering company that provides tools and solutions in the fields of mining, metal cutting, and advanced materials. Although cyclical names have lost their allure in the European slowdown, we continue to invest in high-quality businesses with strong industry positions and durable earnings that are now more realistically valued.

  • In our view, the long-term potential of Gea is not reflected in the price of the shares, which have been depressed by poor execution in recent years. The underlying business performance is now showing signs of improving under a new chief executive officer and chief financial officer, who have a credible restructuring strategy.

Consumer Staples

We further deepened our underweight in consumer staples, our largest underweight, exiting our holding in Essity Aktiebolag, a global hygiene products company. Valuations are now generally expensive in the sector as market volatility fueled demand for defensive stocks. Otherwise, the sector offers good earnings growth visibility, strong returns, and healthy dividends.

  • We exited our position in Essity Aktiebolag, 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.

Communication Services

We reduced our overweight in communication services, selling our holding in Iliad, a leading provider of mobile and broadband services in France, and trimming our position in Cellnex Telecom, a Spanish company engaged in the wireless transmissions business, taking some profits after strong performance. The company, a high-conviction investment, is still our largest holding in the sector.

  • We exited Iliad to raise funds for more interesting opportunities.� While the French business, the mainstay of operations, is showing signs of recovery, losses in the new Italian business were unexpectedly high in the first half and could curb growth over the medium term.

Real Estate

As we seek to maintain a balanced portfolio to counter market volatility, we have raised our exposure to the real estate sector, moving to a modest overweight. In the third quarter, we added Belgium-based real estate investment trust Warehouses de Pauw, which operates logistics warehouses and distribution and storage facilities in the Netherlands, Romania, France, and Benelux.

  • Warehouses de Pauw attracted us because it is a well-run company with strong development expertise, enabling it to deliver above-normal returns. The company is also expanding into Romania, a fast-growing economy that is planning extensive infrastructure investments.

Consumer Discretionary

We pared our overweight allocation in consumer discretionary, trimming Daimler, a leading global manufacturer of premium automobiles and trucks, and Zalando, Europe's largest online retailer. The gloomy global trade environment is affecting key industries such as autos, and the consequent uncertainty and slowing economic growth is depressing consumer-related industries.�We still own shares in auto components company Autoliv, a best-in-class supplier of automotive safety systems. In retail, we also hold SEB, a France-based household equipment manufacturer that has leading global brands, which are coping resiliently amid slowing economic growth.

Sectors

Total
Sectors
11
Largest Sector Industrials & Business Services 16.46% Was (30-Nov-2019) 16.63%
Other View complete Sector Diversification

Monthly Data as of 31-Dec-2019

Indicative Benchmark: FTSE All World Developed Europe ex United Kingdom Index

Top Contributor^

Health Care
Net Contribution 0.74%
Sector
0.04%
Selection 0.71%

Top Detractor^

Industrials & Business Services
Net Contribution -0.70%
Sector
0.05%
Selection
-0.75%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Materials
By3.01%
Fund 9.42%
Indicative Benchmark 6.41%

Largest Underweight

Consumer Staples
By-7.95%
Fund 4.38%
Indicative Benchmark 12.32%

Monthly Data as of 31-Dec-2019

31-Dec-2019 - Dean Tenerelli, Portfolio Manager,
We moved back to an underweight position in consumer discretionary for stock-specific reasons. We reduced our allocation to a key holding because we believe the valuation is less compelling after a strong run this year. We continued to reduce our underweight to financials, one of the portfolio’s largest below-benchmark allocations, by opening a position in a large financial services provider in the Nordic region that has the potential to improve returns over the next three years. Most other European lenders could face headwinds from low interest rates and continued re-regulation.

Countries

Total
Countries
13
Largest Country France 20.18% Was (30-Nov-2019) 22.05%
Other View complete Country Diversification

Monthly Data as of 31-Dec-2019

Indicative Benchmark: FTSE All World Developed Europe ex United Kingdom Index

Top Contributor^

Sweden
Net Contribution 0.71%
Country
0.03%
Selection 0.68%

Top Detractor^

France
Net Contribution -0.58%
Country
-0.02%
Selection
-0.56%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Spain
By5.36%
Fund 11.45%
Indicative Benchmark 6.09%

Largest Underweight

Germany
By-7.53%
Fund 11.32%
Indicative Benchmark 18.85%

Monthly Data as of 31-Dec-2019

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 06-Jan-2020)

Dean Tenerelli

Dean Tenerelli is portfolio manager in the Equity Division at T. Rowe Price. He manages the Europe Equity Strategy, a position he has held since October 2005, and is chairman of its Investment Advisory Committee. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Tenerelli has 28 years of investment experience, 19 of which have been at T. Rowe Price. He joined the firm in 2000 as an equity research analyst and was appointed co-manager of the firm's Global Equity Strategy in 2004. Prior to joining T. Rowe Price, Mr. Tenerelli served as a director for Credit Suisse Asset Management, where he was a senior telecommunications analyst. Prior to Credit Suisse Asset Management, Mr. Tenerelli worked as assistant portfolio manager at Artisan Partners (1995-2000). He began his investment career in 1993 at Banesto Bolsa in Madrid as an equity analyst following Spanish equities. Mr. Tenerelli later became an international equity analyst, focused on Europe, for Waddell and Reed in Kansas City, MO. In 1995, he moved to Artisan Partners as an assistant portfolio manager.

A graduate of Rutgers University with a B.A. in economics, Mr. Tenerelli earned an M.B.A. from Escuela Superior de Administracion y Direccion de Empresa and an M.A. in international management from American Graduate School of International Management (Thunderbird).

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    19
  • Years investment
    experience
    28
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
    9
  • Years investment
    experience
    30

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges UK Tax Reporting Status
Class I €2,500,000 €100,000 €0 0.00% 65 basis points 0.75% Yes
Class Q €15,000 €100 €100 0.00% 65 basis points 0.82% Yes

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

T. Rowe Price Funds SICAV and its sub-funds are domiciled in Luxembourg and therefore considered offshore funds for UK tax purposes. Selected share classes of T. Rowe Price Funds SICAV have been designated “Reporting Funds” by HM Revenue & Customs (HMRC) under the guidelines of the UK Offshore Funds Regulation. These share classes report all relevant tax information to HMRC on an annual basis. Details on the information reported are outlined in the SICAV Shareholder Tax Reporting document that is available in the Fund Range Docs drop-down. Investors in “Reporting Fund” share classes who are considered United Kingdom residents for tax purposes will have any accrued gains treated as a capital gain rather than income upon sale or other disposal of their shares. 

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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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