Ferrari-loving fund that chases European gems

IF DOMESTIC Brexit concerns make you wary, a hop across the Channel might provide the returns you crave.

The managers of Miton European Opportunities make it their business to steer their continental-centred fund through periods of short-term upheaval wherever it may occur – a strategy that could work to the advantage of investors worried about the current brouhaha at home.

Carlos Moreno and Thomas Brown have managed the £395 million fund jointly since its launch nearly three years ago. They share a philosophy of buying good quality companies listed in Europe – with German, Swiss, Italian and French names dominating. Their selection of companies share a distinctive characteristic – that their businesses have strong brands which make it hard for rivals to muscle in on their patch.

The pair hold on to their purchases for the long term because they expect the companies to be bigger and more profitable down the line. Moreno calls these ‘gem stocks’ – of which they have picked 50 – the ‘baubles’ of the Continent.

The strategy has paid off so far, with the fund up nearly 70 per cent since launch almost three years ago. The growth has been a more modest 6 per cent in the last year but that compares to a 7 per cent average drop for rival funds in its sector.

One of the more glittering baubles they hold is Ferrari – the luxury sports car manufacturer spun off from Fiat Chrysler a few years ago. Moreno says: ‘We like to spend time on spin-offs as they are often great brands that perform well once they are free of the control and bureaucracy of the bigger company. Ferrari can now buy all the bits it needs from whichever suppliers it wants. It also has strong barriers to competition.’

Their hope is that it will emulate the success of bigger rival Porsche. Moreno says: ‘Ferrari sells about 8,500 cars a year. Porsche sells 250,000. It shows that you can get bigger without damaging the brand.’

A less glamorous but equally important bauble is Amplifon – an Italian retailer of hearing aids that also offers hearing tests. The managers reckon the ageing population around the world is going to bring big profits its way.

Moreno and Brown like the healthcare sector, which makes up more than a quarter of the fund. But they focus on so-called ‘meditech’ firms (like Amplifon) as they find them fleeter of foot and less unpredictable than the drugs companies, which are dominated by global giants whose expensive drugs trials may succeed or fail. Whilst the fund is technically for firms from continental Europe only, the managers are allowed to invest 5 per cent maximum in the UK. One UK-listed firm, Homeserve, has made the grade. It is a dominant player in the domestic home emergency repairs business but is expanding steadily into other nations.

Overall, the managers prefer companies in the turnover range of £1 billion to £10 billion – anything bigger they avoid on the premise that ‘large elephants cannot run’.

Patrick Connolly, of financial adviser Chase de Vere, says it is an ideal fund for investors to buy and hold for the long term. He adds: ‘It could get left behind if markets race ahead. But its longterm defensive nature should help to guide it through periods of market turbulence. This should be the case with any Brexit turmoil. Investors should be well protected as the fund’s focus is on investing in companies which export globally, so it is not overly reliant on the UK or European economies.’