Capital Group European Opportunities (LUX) will be available to investors in Asia and Europe with its launch as a Luxembourg-domiciled fund in February 2021. The fund will offer access to a longstanding European equity strategy, originally launched as a segregated account in 1992. The fund will be managed by the same experienced portfolio management team and follow the same investment approach. In this Q&A, portfolio manager Michael Cohen gives us an insight into the strategy.

 

Can you describe some of the key characteristics of the strategy?

The three portfolio managers – Patrice Collette, Lawrence Kymisis and I – are focused on selecting companies in Europe with relatively strong and sustainable growth prospects that will deliver capital appreciation. Within the strategy we have the flexibility to invest in companies across the full market cap spectrum, which I believe showcases the breadth and depth of our research capabilities at Capital Group. 

As long-term investors, we value the importance of investing in – and partnering with – companies that we perceive have capable and trustworthy management teams. We believe that investing in and partnering with well-run companies will also result in low turnover in the portfolio (having an average holding period of at least four years). Valuation is, of course, also an important parameter we pay attention to.  

 

Can you briefly describe the set-up of the portfolio management team?

We have built a team of three portfolio managers that have a mixture of backgrounds and investment approaches. For example, Lawrence has a background as a small-cap analyst. He focuses on identifying companies with competitive advantages and relatively strong tailwinds that are independent of economic cycles and macroeconomic conditions, with strong management teams in place. Patrice has a rather more contrarian investment approach in that he tends to hold out-of-favour companies, which he believes will recover strongly and that tend to offer good yields. Each portfolio manager not only has deep knowledge of European economies, but they have also operated across the different market capitalisation ranges. 

Experienced management team
Capital Group European Opportunities strategy

 

Reflects current portfolio manager team as at 30 September 2020. Years in profession and years with Capital Group as at 31 December 2019.
For current analysts in the research portfolio: average number of years in profession and with Capital Group. As at 30 September 2020.

 

What are the benefits of investing across the market cap spectrum? 

Having the flexibility to invest across the market cap spectrum allows us to access evolving opportunities across European economies. For example, we are living in a period of great technological innovation and disruption. This is opening up many interesting opportunities to invest in companies that previously may have been considered as having only narrow possibilities. One such area is online gaming, which has seen tremendous growth during the COVID-19 pandemic. When we first invested in Sweden-based Evolution Gaming it was a small-cap company and has remained so until relatively recently. It is now a large-cap share that is considered a leader in the European online casino market with a strategy to expand into the US market. It is a classic example that showcases our research capabilities and our ability to find early-stage growth companies that have been overlooked by the market.

We are able to leverage the research of our global network of analysts, which enables us to uncover some compelling investment opportunities. For example, we hold Genus, which is the only listed animal breeding company. It’s an innovative company that is unlikely to be found elsewhere in the world. There are many unique companies with innovative cultures in Europe that we are invested in, and if we were to compare our holdings to the MSCI Europe Index and even to our competitors, our portfolio is very different. 

 

 

 

Risk factors you should consider before investing:

• This material is not intended to provide investment advice or be considered a personal recommendation.
• The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
• Past results are not a guide to future results.
• If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease.
• Depending on the strategy, risks may be associated with investing in fixed income, derivatives, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.