A valuation led European equity fund exploiting market inefficiencies in areas where there is positive change such as a beneficial restructuring, digitalisation or decarbonisation.
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 portfolios are actively managed and attractive valuations underpin all investment decisions; our philosophy is to identify companies with valuations that do not reflect their future prospects.
Using an active investing approach we search for the best European opportunities at any point in time in whatever stock, sector or country. Access the Invesco European Equity Fund (UK) 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. Plus we engage closely with the underlying companies and their management teams to really understand the full potential of their strategy and targeted returns.
John Surplice and James Rutland are part of the Henley-based European Equities team. Both manage the fund’s stock selection. John has over 25 years experience, while James has more than 10.
The team has extensive knowledge of local markets and a track record of identifying companies with attractive opportunities.
Keen to learn more? Visit our valuation opportunities page for:
The 2025 equities outlook is improving. Balance sheets look healthy, and many stocks are attractively valued, though geopolitical risks remain. Find out more.
As interest rates normalise, the balance between growth and value stocks shifts, creating new opportunities for fundamentals-focused investors. Learn more.
Active European equity investing is helping to navigate the complex nature of politics in the region. Find out more.
John Surplice, Head of European EquitiesWe expect strong real and nominal economic growth in Europe and further afield over the next few years. This would be a marked change from the last decade.
The team has more than 35 years of experience in investing in European equities. Today, the strategy’s AUM totals >€2bn.
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.
Looking ahead equity markets will need to navigate stubbornly high inflation. However, a mild winter and widespread efficiency gains in energy usage means rationing is off the table and next winter will likely not be a problem. This is supportive for economic growth going forward.
Furthermore, many of the areas which naturally attract the Fund’s focus are short duration in nature and therefore benefit from the current higher interest rate environment relative to longer duration/growth assets which need lower rates.
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 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.
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. The fund may use derivatives (complex instruments) in an attempt to reduce the overall risk of its investments, reduce the costs of investing and/or generate additional capital or income, although this may not be achieved. The use of such complex instruments may result in greater fluctuations of the value of the fund. The Manager, however, will ensure that the use of derivatives within the fund does not materially alter the overall risk profile of the fund. Although the Fund invests mainly in established markets, it can invest in emerging and developing markets, where there is potential for a decrease in market liquidity, which may mean that it is not easy to buy or sell securities. There may also be difficulties in dealing and settlement, and custody problems could arise.
Data is as at 31/08/2023 and sourced from Invesco unless otherwise stated.
This is marketing material and not financial advice. It is 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.
Views and opinions are based on current market conditions and are subject to change.
For the most up to date information on our funds, please refer to the relevant fund and share class-specific Key Investor Information Documents, the Supplementary Information Document, the financial reports and the Prospectus, which are available using the contact details shown.
EMEA3094079/2023
