Investing in Europe is not fashionable these days. Pessimism around the Old Continent’s prospects are commonplace. Stalling growth, high energy prices, an unattractive cost structure and a dearth of innovation are most frequently cited when arguing the case against investing in Europe. While the US is seemingly inventing the future, Europe is thought to be living off its past.
It is true that such a view would at least superficially be supported by the performance track record of the European equity market. Indeed, when looking at the past fifteen years, the headline return numbers are not particularly awe enticing. In fact, most global markets and certainly the most considered global benchmarks outperformed the European market significantly. While this is important, it is only part of the story. Also true is that significant subsets of the European market performed excellently over the last two decades and delivered returns that stack up much more favourably in a global comparison. What’s more, these subsets, driven by their structural growth, are gaining ground, and are becoming more important for the overall market. Therefore, we believe that contrary to the public perception the European equity market is becoming more attractive, not less.
In a new report series, we seek to address this disconnect. We will look at European equity performance over the past couple of decades, explain what has driven the subdued result and highlight which subsets of the market have worked well. Finally, we will argue that although European indices cannot match other markets’ growth credentials, a selective approach to investing in Europe would have delivered highly attractive results. We thus make the case for focusing on Europe’s strengths. We firmly believe, and seek to demonstrate, that across multiple global industries, Europe occupies positions of enormous comparative advantage. These are industries with significant structural growth tailwinds at their back and thus a promising future ahead.
Matthias Born has been CIO Equities since 2017 and Head of Investments of Wealth and Asset Management since 2019. He started his career in 2001 at Allianz Global Investors (AGI), where he managed portfolios for European Small Caps, European growth stocks and German equities from 2002 to 2017. In his 16 years at AGI, he has built two very successful equity franchises and was responsible for client assets in the double-digit billions. Matthias Born has an excellent track record over two decades and received several awards for his outstanding and consistent performance. He studied at the University of Wuerzburg and holds a degree in Business Administration.
Justus Schirmacher has been a Portfolio Manager at Berenberg since January 2019. He started his career at Goldman Sachs in 2014 as an equity analyst in the European Autos Team. Before joining Berenberg, Justus Schirmacher worked in the GS SUSTAIN team. Here, the focus was on identifying cross-sector companies with successful and sustainable business models that have strong competitive advantages and benefit from structural growth. Justus Schirmacher studied history at the University of Cambridge.