A valuation led continental European small cap equity fund exploiting market inefficiencies in areas such as social inequality, climate change and digitalisation.
After years of depressed activity, Europe is on the path to recovery.
Governments have taken measures to redistribute wealth, while investment in tech and climate change are growing dramatically.
Europe draws more visitors than any other region in the world. But investors still struggle to see it as an investment destination. On the surface, it isn’t hard to see why: its economy has been sluggish since the global financial crisis, and its businesses seem less exciting than those you can find elsewhere.
But we dig deeper – because it’s always good to look for opportunities where others aren’t looking.
Super: What are the opportunities in Europe?
When investors think about ‘Technology’ and ‘Digitalisation’ as investment themes, most tend to focus on traditional innovation, and therefore, the US and Asia.
But digitalisation is also providing investors with opportunities in Europe. It’s home to technology companies, such as Cap Gemini and SAP, but industrial and consumer-facing companies are now part of the story.
Super: The Digitalisation of Everything
You see, the ‘Digitalisation of Everything’ is the catalyst for turning more traditional businesses into innovative ones. For those embracing the change, it’s about much more than just having a website or adopting a cloud strategy – it’s about sustainability and long-term value creation.
Super: Sustainability and long-term value creation
Covid-19 has shown us how important digital technologies are. With millions of people staying at home, many turned to digital devices that enabled them to work and connect with friends and family across the globe.
The pandemic has changed us. So, it’s perhaps not surprising that the EU’s response to it marked a significant departure from the austerity economics that has dominated policymaking since the global financial crisis.
Super: Europe’s €750bn recovery fund
A €750 billion recovery fund – dubbed ‘Next Generation EU’ – has been created to help Europe emerge from the pandemic not just stronger, but also greener and fairer.
A large share has been set aside to support the region’s green and digital transition. Energy independence has become a priority. And with its strong engineering base, Europe also has the opportunity to become a global exporter of green tech products and services.
Super: Global exporter of green tech products and services
But the benefits must be widely shared.
The recovery plan supports initiatives that aim to reduce social inequality and foster inclusion. Creating quality jobs within the ‘new economy’ will be an important element here.
Covid-19 has also tested the resilience of global supply chains. And so, after decades of offshoring manufacturing jobs, momentum is building to bring supply chains closer to home. Any instability arising from geopolitical conflicts will only strengthen this view.
Super: Bringing supply chains closer to home
Reshoring or nearshoring is high on the agenda of many European companies, and is likely to benefit Europe as a whole. Policies that encourage bringing employment back to the region can help accelerate this.
All these actions will have important economic and investment consequences. As with all changes, there are risks to be considered, but substantial opportunities will also be created.
Discover the potential of Europe with us.
Super: Discover the potential of Europe with us.
All our European equity funds share a common approach that is grounded in valuation-driven, active management. Our philosophy is to identify companies whose future prospects are not reflected in their current valuations. We believe this mispricing will be later recognised by the market.
The investment concerns the acquisition of units in an actively managed fund and not in a given underlying asset.
Our active approach to investing has no preconceived style bias. We search for the best opportunities at any point in time in whatever stock, sector or country.
Access the Invesco Continental European Small Cap Equity Fund product page to view KIIDs and factsheets.
Behavioural biases repeatedly give rise to market inefficiencies: markets often overreact by focusing on near-term issues, while expectations are often overly influenced by the extrapolation of current trends.
We aim to take advantage of these inefficiencies by placing a strong emphasis on valuation – the key determinant of future returns.
Erik Esselink and James Matthews are a part of the Henley-based European Equities team. Both manage the fund’s stock selection and each have more than 20 years industry experience.
The fund benefits from the team’s extensive knowledge of local markets and a track record of identifying companies with attractive opportunities.
For complete information on risks, refer to the legal documents. The value of investments and any income will fluctuate (this may partly be the result of exchange-rate fluctuations) and investors may not get back the full amount invested. This is a small companies fund, you should be prepared to accept a higher degree of risk than a fund that invests in larger companies.
Equities investment outlook: our equity market predictions for 2024
It’ll be a challenging backdrop for equities in 2024. From an investment perspective, company fundamentals are likely to become more important. Read our investment outlook for more.
Circular economy: unearthing investment treasures in the trash
The second instalment of our thematic sustainability blog series discusses what a circular economy is. We look into what’s required for it to be successful, and how it can generate unique investment opportunities.
2022: What’s in store for European equities?
We’ve argued for a while that a move away from the low growth/low inflation world of the last decade is overdue. That change is now underway. Find out why.
The team has a combined investment experience of 40 years in European equities. Today, the Continental European Small Cap strategy’s AUM totals >€500mn.
Investment opportunities are opening up in social inequality and climate change. Companies are also transforming digitally and improving productivity. Growth in this area is expected to be dramatic.
Europe’s GDP outlook is positive. Household savings levels have been built during the pandemic and will give consumer spending a boost. The EU recovery fund will support government and private investment, while capex is set to accelerate.
You can invest in the European stock market by investing in actively managed mutual funds or exchange traded funds (ETFs). Invesco offers a broad range of actively managed funds and ETFs.
We identify stocks with valuations that have not been reflected by the market but whose future prospects may be recognised by it later. We have no preconceived style bias towards stocks, sectors or countries, rather we look for the best investments at any point in time.
Let us know using this form and one of our specialist team will quickly get back to you.
Data as at 28.02.2022, unless otherwise stated. This is marketing material and not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
For more information on our funds and the relevant risks, please refer to the share class-specific Key Information Documents/Key Investor Information Documents (available in local language), the Annual or Interim Reports, the Prospectus, and constituent documents, available from www.invesco.eu. A summary of investor rights is available in English from www.invescomanagementcompany.lu. The management company may terminate marketing arrangements.
This is not an invitation to subscribe for shares in the fund and is by way of information only, it should not be considered financial advice. This does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. Persons interested in acquiring the fund should inform themselves as to (i) the legal requirements in the countries of their nationality, residence, ordinary residence or domicile; (ii) any foreign exchange controls and (iii) any relevant tax consequences. As with all investments, there are associated risks. This communication is by way of information only. Asset management services are provided by Invesco in accordance with appropriate local legislation and regulations. The fund is available only in jurisdictions where its promotion and sale is permitted. Not all share classes of this fund may be available for public sale in all jurisdictions and not all share classes are the same nor do they necessarily suit every investor. Fee structure and minimum investment levels may vary dependent on share class chosen. Please check the most recent version of the fund prospectus in relation to the criteria for the individual share classes and contact your local Invesco office for full details of the fund registration status in your jurisdiction. This fund is domiciled in Luxembourg. Any investment decision should take into account all the characteristics of the fund as described in the legal documents. For sustainability related aspects, please refer to https://www.invescomanagementcompany.lu. The investment concerns the acquisition of units in an actively managed fund and not in a given underlying asset.
EMEA2659018/2023
