Martin Currie relaunches European fund

Martin Currie has relaunched its European fund as the Martin Currie European Equity Income fund.

Ross Watson
Ross Watson

The fund, managed by Ross Watson, has adopted a revised mandate and will look to return an income yield greater than the MSCI Europe ex-UK index.

Watson is to run fund as a 40-60 stock, multi-cap portfolio of predominantly continental European equities.

The manager says: “At a sector level, the fund is overweight in consumer stocks, thanks largely to two auto companies: Daimler and Continental. I like these stocks as they have good exposure to new car markets in the US and China, are well financed and managed, and offer high, well-covered dividends as well as strong growth prospects.

He adds: “I am positive on energy – especially the oil-service sector, where I hold stocks such as Seadrill and SubSea7. The portfolio is also overweight in the materials sector, where I am drawn to the robust fundamentals that are in evidence; my view is that dividend growth will be strong here and ahead of the market’s expectations.”

Watson says: “Certain sectors in Europe remain under pressure. In telecoms, for example, yields may be high but growth is challenged – as are future dividend levels.

“I continue to be underweight in the European financial sector – especially the banks. Cash dividends from banks are very rare across Europe, and the sector remains under significant regulatory pressure to raise more capital. I also believe bad debt provisions have further to rise. The insurers offer better value, and I hold SCOR, a French company in this sector.

“Apart from banks and telecoms companies – which we expected to be bad – I have been quite encouraged by dividend announcements across Europe. Balance sheets are in good shape, companies have access to finance, and I think that dividend growth can be maintained. Indeed, I expect dividend growth of 7% from the portfolio over the next year.”