Companies in Europe benefiting from a global perspective, according to New Star’s Simon Rowe


Simon Rowe has recently been appointed co-manager of the highly successful €2.4bn New Star European Growth Fund*. Simon, who has worked alongside lead manager Richard Pease since 2001, explains below why the outlook for Europe is positive and picks some of his favoured stocks.

The economic environment in Continental Europe has become increasingly supportive for equities over recent years. Whereas investors used to have concerns about unemployment, stagnant growth rates and a reliance on exports to the US, there is now renewed optimism. Consumer and business confidence is buoyant, unemployment levels are low, valuations are relatively cheap and private equity interest continues to lift share prices. The all important German economy is re-emerging as an industrial leader and the election of Nicolas Sarkozy has the potential to breathe new life into the French marketplace.

Many businesses in Continental Europe are now looking beyond their national borders and providing the expertise and specialist components required as construction gathers pace in emerging markets around the world. This demand from the likes of China, India, Central Europe and Russia has helped to offset the slowdown in the US. Currently, the fund has a healthy balance between companies with exposure to the established markets of Western Europe and those with indirect exposure to global emerging markets.

While the macro picture is supportive, it is the quality of individual companies currently being identified that is particularly encouraging. Many businesses in which the fund invests offer a niche product or service. Whereas the growth of certain sectors, such as banks and retailers, is closely linked to underlying economic trends, niche companies participate in gains during rising markets and offer resilience during downturns. While the fund's macro view is therefore important, the quality of individual companies, irrespective of their size, is the deciding factor when investing.

With the Europe excluding UK and global economy on course for further growth, albeit at a slightly slower pace, the most sensible strategy for investors is to ensure the companies they own have strong business models. In time, attractively valued companies with proven management and strong cash flows will reward investors and are likely to be less volatile should the global economy take a turn for the worse.

Favoured stocks

The opening up of the European Union has led to many companies moving their suppliers east, to the likes of Poland and Romania. MAN, the German truck maker, has benefited from this changing dynamic, meeting the increased demand for the transport of components. In addition, demand has increased from supermarket networks and other consumer-related companies.

BNP Paribas, the French bank, was recently bought by the fund because of its low valuation relative to future earnings, its strong client relationships and high quality of management. Subsequently, interest in the French banking sector has increased as investors consider the potential for consolidation and the stock has contributed positively to performance.

Finland-based Wärtsilä is one of the world's dominant ship engine businesses. While the bulk of new ships are now built in China, there are only a limited number of companies around the world trusted to produce reliable engines.  Wärtsilä is one of them and, with demand growing and a healthy back-up of orders, is a European business benefiting as well as contributing to global growth. 

*Fund size at 30/04/07.

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For further information, please contact Trina Arthur at New Star International on +44 (0)20 7225 9574.

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NOTES TO EDITORS:


Past performance is not necessarily a guide to future performance. The opinions expressed here represent the views of the fund manager at the time of preparation and should not be interpreted as investment advice.

IMPORTANT INFORMATION

This document is for professional investors, professional advisers and other financial institutions only and should not be provided to or relied upon by private investors.

Past performance is not necessarily a guide to future performance. The value of investments and any income from them may fall as well as rise and investors may not get back the amount originally invested. The value of investments may also increase or decrease as a result of changes in exchange rates between currencies.  Investments involve certain risks, as described in the relevant prospectus.  Any opinions expressed in this document may vary without prior notice and do not constitute investment advice.

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The New Star Global Investment Funds PLC (the Fund), of which the New Star
European Growth Fund is a sub-fund, should be viewed as an investment suitable only for investors who can fully evaluate and bear the risks involved. Full details of the fund can be found in the prospectus or Offering Document, in the case of Hong Kong. Any investment decision must be made solely on the basis of the information contained in the prospectus/Offering Document, which is available on request from New Star. The simplified prospectus and most recent annual and interim reports are also available upon request.

The fund mentioned in this document is not registered for distribution except as noted below. The New Star Global Investment Funds PLC (the Fund) is regulated by the Irish Financial Services Regulatory Authority (Irish Financial Regulator).

The shares referred to in this document have not been and will not be registered under any United States securities laws, and, except in a transaction that does not violate the United States securities laws, may not be directly or indirectly offered or sold in the United States of America, or any of its territories or possessions, or areas subject to its jurisdiction or to or for the benefit of a United States person.

The manager of the Fund, New Star Investment Funds (Ireland) Limited, is regulated by the Irish Financial Regulator. The investment manager, New Star Asset Management Limited, is regulated by the Financial Services Authority of the United Kingdom (the FSA). The custodian is State Street Custodial Services (Ireland) Limited.

The Fund has been registered for distribution in Denmark with the Danish Financial Supervisory Authority, in Sweden with the Swedish Financial Authority, in Finland with the Finnish Financial Supervision Authority, in Malta with the Malta Financial Services, in France with the Autorité des Marchés Financiers, in Spain with the Comisión Nacional del Mercado de Valores under number 407, in the Netherlands with the Autoriteit Financiële Markten, in Italy by the Bank of Italy and in the United Kingdom with the FSA The Carnegie Fund Services SA, 20 rue du Conseil Général, 1205 Genève, Suisse (Postal address: Casa Postale 5656, 1211 Genève 11), Tel: +41 22 7051177, Fax: +41 22 7051179 has been appointed as the representative of the Fund in Switzerland. For Hong Kong: The Fund has been authorised by the Securities and Futures Commission (the SFC). Authorisation by the SFC does not in anyway imply any official approval or recommendation by the SFC. In Singapore the sub-funds are recognised as Restricted Collective Investment Schemes by the Monetary Authority of Singapore.

This document has not been verified or approved by any relevant supervisory authority in the jurisdictions where the Fund is registered.

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