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