‘We made money even while Europe was in lockdown’

Europe is slowly returning to normal after coronavirus caused country after country to put its economy into a state of suspended animation. Its stock markets have also been recovering.

While share prices plunged early in the year, they have rebounded strongly since lows in March.

The Man GLG Continental European Growth fund, managed by Rory Powe, has done particularly well. Although the European market remains down for the year, his fund has made investors about 6pc.

He tells Telegraph Money which companies he expects to thrive and why Europe could be about to experience a long-overdue resurgence.

WHAT MAKES YOU DIFFERENT FROM RIVAL FUNDS?

We invest in Europe for the strength of its companies, not its economies. To qualify, our stocks must be clear world leaders at what they do and have competitive strengths, such as pricing power.

WHO IS THE FUND FOR?

It is for people who take a long-term view and want to invest in a portfolio of European companies. They must be prepared for the inevitable periods of volatility along the way.

HOW HAS EUROPE FARED DURING THE PANDEMIC?

The market is down over the year so far but there has been a very strong rebound since the lows in March, and it rose significantly in 2019. So, from a longer perspective, it has not been a disaster. Most companies will be affected and we have seen evidence of that in the first three months of 2020.

But in difficult times, customers gravitate towards the strongest brands; the ones they trust.

Europe has a number of things that should help it through this crisis. A lot of companies take a long-term approach and have not been guilty of “over-earning”.

Firms that have high margins or unsustainably high returns may not have spent enough on developing their businesses, giving priority instead to profitability and shorterterm rewards for shareholders.

European companies aren’t so much in the business of trying to beat earnings estimates every quarter and tend to have big family shareholders, who are more focused on the sustainability of the firm.

Rory Powe of Man GLG tells Jonathan Jones why European firms are well placed to survive the coronavirus crisis

HAS YOUR FUND BEEN AFFECTED?

Yes – even companies that we do not associate with their local country’s economy, such as Ferrari.

It is an Italian company but the state of the Italian economy doesn’t have a bearing on the firm’s future.

When Italy went into lockdown, however, it affected Ferrari because it had to cease production for seven weeks. It lost about 2,000 vehicles, a fifth of its sales for the year.

We hope it can recover half of that over the rest of the year as it works Saturdays and more over the summer.

You can’t always divorce the company from the country but we try to minimise the effect by focusing on firms that sell all over the world. The pandemic has affected some regions and countries more than others.

DO YOU WORRY ABOUT YOUR COMPANIES’ DEBT LEVELS?

Companies with high levels of debt that have prioritised dividends are more vulnerable now, but it is more nuanced than just having no debt.

We look for firms that have cash in reserve or, if they have debt, that it is staggered into the future rather than nearly due. As debt is cheap, the temptation is to exploit it but we prefer our firms to be conservative, even if it is not as efficient.

Firms also shouldn’t have built up liabilities by paying suppliers later, for example, as paying those obligations can be nasty when the music stops.

£1,000 invested at launch would be worth £7,498 today