European funds outperform UK since Brexit vote

European fund performance has trounced the UK in the year since the Brexit vote in the IA equity sectors new analysis reveals.

Today the UK and European Union began Brexit negotiations almost one year since the 23 June referendum.

Since the shock result, Theresa May has committed to a so-called “hard” Brexit, involving exit from the single market and the customs union in favour of curbing immigration and negotiating new trade deals alone rather than with the trading bloc.

May has also threatened to walk away from negotiations with “no deal”.

She has also seen her snap election backfire with the Conservatives losing seats, while Labour saw gains. In contrast, elections in the Netherlands and France saw off populist threats to the relief of markets.

Since the Brexit vote, the Henderson European Smaller Companies, Neptune European Opportunities and Marlborough European Multi-Cap funds have delivered the best returns with 56.6 per cent, 55.8 per cent and 55.7 per cent respectively.

The IA European Smaller Companies sector has delivered 34.7 per cent and the Europe ex-UK sector has delivered 34.2 per cent over the period.

In contrast, the UK Smaller Companies and UK All Companies sectors have delivered 26.3 per cent and 19.4 per cent respectively since the referendum.

Of the 100 best performing funds in both sectors over the period just nine were UK equity funds.

Darius McDermott, managing director of Chelsea Financial Services, says it is possible this trend will continue “in the short term at least” as uncertainty takes its toll. 

Positive growth numbers on the continent are coming into focus now some of the contentious national elections are out of the way.”

McDermott notes the Old Mutual UK Smaller Companies Focus and TM Cavendish AIM funds have both delivered 55.5 per cent and 51.2 per cent respectively landing them in the top 10 in the UK and European sectors over the period.