HEAD-TO-HEAD: Investec vs MFS

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Pictured: Mark Hinton, Allfunds Bank

European equities performed well in 2017, with the MSCI Europe Index rising 26.2% for the calendar year, according to FE data. Last year there was significant investor interest in the continent after many years of it being somewhat “unloved”, according to Mark Hinton, head of strategies at Allfunds Bank.

As a result, “Europe is not cheap anymore,” Hinton said. While the current valuations don’t quite warrant describing European equities as “expensive”, they are above their long-term averages. However, they are still affordable compared to other developed markets, in particular the US.

While the European economy is likely to continue growing based on macro-economic fundamentals, such as improving unemployment rates and high manufacturing PMIs, the fortunes of its equity markets depend largely on global monetary policy decisions, according to Hinton.

“Investors are quite ready to get to the sidelines and go to cash at any opportunity to take the profits they’ve already made,” he said. It will take a high level of skill on behalf of the US Federal Reserve and the European Central Bank to raise interest rates without spooking the markets and causing a significant contraction.

Depending on the investor’s outlook, choosing a fund that would outperform on the upside or one that will protect from the downside becomes an important decision.

With this in mind, FSA compares two European equity funds: the Investec European Equity Fund and the MFS Meridian European Research Fund.

Data: FE, fund fact sheets

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