Investing in Europe

By SYLVIA MORRIS, THIS IS MONEY AND DAILY MAIL SAVINGS EXPERT
Updated:

 

Continental Europe was hyped as the place to invest last year. Investors poured in £2bn in the first three months of 1999.

Over the past year, unit trusts in Europe have been a success story. But in the past few weeks investors have been hard-hit as the technology bubble burst around the world. Some leading funds investing in continental Europe have seen their prices fall by 10% or more.

There is a wide gap between the best and worst. Standard & Poors Research Services, which tracks performance of funds, shows a huge 120% margin between the best and worst-performing funds.

In other words, the best fund would have made you more than twice as much money as the worst.

In the final three months of last year, shares prices of companies involved in telecom, media and technology stocks - or TMT - surged.

Funds which bought heavily into these saw impressive returns.

The popular £1.5bn Gartmore European Selected Opportunities rose a huge 54.1% in the 12 months leading up to the end of March while the £2.8bn Invesco GT European Growth soared a massive 87.7%.

But as the technology bubble burst last month, the price at Invesco fell by 16% and Gartmore by 10%. Other popular funds Fidelity European and Jupiter European were down some 6%.

Independent financial advisers who tipped these funds last year recommend investors sit tight.

Mark Dampier, head of research at Hargreaves Lansdown, says: 'Invesco GT European Growth had around three-quarters of its money invested in these TMT stocks.

'Despite this recent fall, the fund has been an extremely strong performer. It is well managed and a good fund manager does not become bad overnight.'

But he warns that because the fund has grown so large it has lost a degree of flexibility. On this basis its future performance may not be so spectacular as in the past.

For new investors he likes the small £40m AIB Govett European Strategy fund as a racy choice or, for lower risk, the HSBC European, which invests mainly in large companies.

Jason Hollands, from IFA Best Investment, says: 'Both the Invesco and Gartmore funds went heavily into the TMT stocks which have been very volatile.

'Investors should hold tight - they are well-managed funds.'

Meanwhile, the basic European story is still good. Companies are expected to carry on cutting costs and to become more share-holder-friendly and more mega-mergers are expected.

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