Introducing the Invesco Pan European Equity Fund

Contrary to much of the highly negative sentiment in the markets currently, we believe that the scene is being set for a stronger macroeconomic backdrop in Europe; yes, the overall picture is complicated and not helped by politics, but the underlying data is slowly encouraging. Inventory levels are bouncing along the bottom suggesting the next stage will be re-stocking; interest rates are coming down from their highs and so corporate loan demand is increasing and the supply side is easing; at the consumer level, mortgage demand and supply is also improving; European consumers have also enjoyed a year of real wage growth which, together with the current high savings rates, gives them spending power for when their confidence returns – this is important for an economy where the consumer accounts for over 50% of GDP. As consumer spending picks up, so will corporate confidence improve and capex there likely grow, too, and so the circularity continues.

This outlook of macroeconomic improvement (admittedly from very low levels) would be a supportive backdrop for our Quality Transition approach, that is investing in companies that are able and willing to change for the better. Valuations are a key component of our investment process and there are many opportunities in the European equities space whose Quality Transition characteristics have been over-looked by the markets and so are extremely attractively valued.

Positive change for a company is often closely aligned with and affected by market cycles and, given the improving outlook described above, the strategy is strongly positioned for cyclical recovery in order to benefit. Ultimately, however, it is the combination of low expectations and low valuations which is so interesting here – it would only take a marginal positive surprise for many European names to see meaningful earnings upgrades and so share price performance. This is the opportunity for active investors in European equities.

We prefer a ‘quality transition’ (good companies to great companies) approach over a compounders (great companies that stay great) approach and over a macro approach (trying to time the market). This is because our analysis suggests that Quality Transition generates greater returns over the long-term.

We continuously analyse the European markets for valuations that we believe do not reflect the future prospects of the underlying companies. A key component of this research includes three-year IRR analysis for every portfolio holding and large index stock.

We have no preconceived style bias towards stocks, sectors or countries, rather we look for the best investments at any point in time.

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.