A global stock fund from Franklin Templeton’s Martin Currie that’s beating 95% of peers is picking Europe over the US in a bet on cheap valuations.
“We find more attractively valued quality growth companies outside the US for the time being,” said Zehrid Osmani, manager of the $143 million FTGF Martin Currie Global Long-Term Unconstrained Fund.
French cosmetics company L’Oreal SA and chipmaker ASML Holding NV rank among the fund’s top European holdings. ASML has posted a 15% bounce this year, while L’Oreal has risen 12%. Apart from those two stocks, the biggest contributors in Europe to the fund’s performance have been luxury carmaker Ferrari NV, Irish insulation company Kingspan Group Plc, Italian outdoor clothing maker Moncler SpA and French luxury goods company Kering SA.
The fund’s overweight stance in European stocks and underweight the US is part of why it’s outperformed this year. It has returned about 11% so far in 2023, beating 95% of peers, according to data compiled by Bloomberg. By comparison, the MSCI All Country World Index gained 4.4%.
Last year the fund fell 29%, more than the MSCI benchmark, which declined 20%.
Europe has been a popular theme among global fund managers this year. Wall Street strategists, including Citigroup Inc., are favoring the region over the US, due to cheap valuations and the easing energy crisis. European companies are also expected to benefit from China’s re-opening after Covid lockdowns.
The Martin Currie fund is designed to invest in 20 to 40 companies that it calls “quality growth.”
“We want companies that have resilience in terms of earnings,” Osmani said in an interview in Dubai. Martin Currie is a specialist investment manager of Franklin Templeton.
Its top holdings in the US include software firm Microsoft Corp. and health care company ResMed Inc.
In terms of sectors, the fund has a bias to consumer, technology, some parts of industrials — all of which have outperformed the benchmark in Europe so far this year — and health care.
“Some of the tech stocks have pulled back to interesting levels, notably the profitable part of technology stocks,” he said. “There’s still some element of challenge for some of the unprofitable part of the tech space” because of cyclical headwinds.
This article was provided by Bloomberg News.