Baring Europe Select Trust celebrates 25th anniversary

Baring Asset Management (Barings), the international investment management firm, is celebrating the 25th anniversary of its Baring Europe Select Trust which has returned an impressive 2,788% since its launch on 31 August 1984.

Over its lifetime, the Trust has achieved an annualised return of 12.5% versus the 10.5% return on the HSBC Smaller European Index. Over the past five years it has delivered an annualised return of 15.3% to end July. Relative to the Morningstar European smaller companies peer group, the Trust is ranked top in the sector over three and five years and second over one year to end July. Managed by Nick Williams, the £232 million Trust invests in small and mid cap companies in continental Europe.

Nick Williams comments: “Few funds trade for a quarter century with this level of performance. While the shape of the European smaller companies sector has undergone massive change over the past 25 years, our investment approach has remained fundamentally the same: to identify under-recognised growth companies in an inefficient market through fundamental analysis.”

According to Barings, the harmonisation of the political, economical and geographical landscape in Europe over the past 25 years has led to a growing European investment universe and many opportunities for a skilful stock-picker - a theme set to continue as the European small and mid cap sector grows.

Nick Williams continues: “The European smaller companies sector was in its infancy back in 1984, when Europe was a very different market than today. Back then we had to contend with 16 currencies and a similar number of country-specific accounting practices before the introduction of the International Financial Reporting Standards (IFRS) in 2001. There were only ten member states in The European Union excluding countries such as Spain, Sweden, Austria and Portugal. It was a time when European citizens could not move across borders freely, the euro had not been introduced and the Iron Curtain still divided Germany.

“Key sectors now such as telecoms and technology have developed beyond recognition over the past 25 years. The number of listed companies has increased as a result of privatisations and IPOs as equity markets have increasingly taken on the role of funding smaller companies. We have also seen a change in attitude among listed companies with far greater focus on shareholder requirements.”

Looking forward, Nick and his team remain focused on investing in companies with strong niche positions, good growth prospects and quality management with a commitment to shareholder value.

“European smaller companies have an exciting future yet those that stand up best to the increased competition from emerging markets are those that leverage the continent’s reputation for innovation and quality while making prudent use of overseas markets with lower cost bases. There will always be a premium for quality and the European market has no shortage of examples, whether it is luxury designers in Italy or Scandinavian telecommunications hardware manufacturers. These companies can harness the impact of globalisation positively.”

Nick concludes: “We expect to see a rise of small to mid-sized companies in Europe coming to market over the next few years as equity markets take over the role of banks in providing funding. And as more Eastern European countries join the EU and become part of the mainstream investment universe, the next few years offer tremendous potential to our investors.”