Value stocks are back in vogue in Europe. This year, the Morningstar Developed Europe Value TME Index is up 18.7%, outperforming the Morningstar Developed Europe Growth TME Index, which is up 5.5% when including dividends.
The main driver of this outperformance is related to the sharp increase in the share price of European banks, which make up a significant component of European indexes.
HSBC HSBA is up 27.7%, Santander SAN jumped 92.6%, BBVA BBVA gained 75.9%, Intesa Sanpaolo ISP 46.1%, BNP Paribas BNP 42%. Insurers have also recorded significant gains this year, with Allianz ALV up 25% and AXA CS up 23.4%.
To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods. All names that passed the screen were actively managed.
Europe Large-Cap Value Equity Funds Performance
- Dimensional European Value
- JPMorgan Funds - Europe Strategic Value Fund
- M&G (Lux) Investment Funds 1 - M&G (Lux) European Strategic Value Fund
Over the last 12 months, the Europe large-cap value Morningstar Category returned 18.72%. On an annualized rate, Europe large-cap value funds have returned 13.64% over the last three years and gained 11.98% over the last five years. That compares with the Morningstar Europe Index, which has returned 14.77% over the last 12 months, gained 12.53% per year over the last three years, and gained 10.09% per year over the last five years.
What Are Europe Large-Cap Value Equity Funds?
Europe large-cap value equity funds invest principally in the equities of large-cap European companies that are less expensive or growing more slowly than other European large-cap firms. Equities in the top 70% of the European equity market are defined as large-cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow).
Screening for the Top-Performing Europe Large-Cap Value Equity Funds
To find the best Europe large-cap value funds, we looked at returns data from the past one, three, and five years, using data available in Morningstar Direct. We screened for Europe-domiciled open-ended and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We excluded funds with assets under £100 million. This left three investments.
Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. In addition, Medalist Ratings may differ among the share classes of a fund.
Dimensional European Value
- Share Class: Dimensional European Value USD Acc
- Morningstar Medalist Rating: Silver
- Morningstar Rating: ★★★★★
The £356.8 million fund has climbed 26.87% over the past 12 months, outperforming the average fund in its category, which rose 15.85%. The Dimensional fund, which launched in September 2007, has climbed 17.16% over the past three years and gained 16.92% over the past five years.
JPMorgan Funds - Europe Strategic Value Fund
- Share Class: JPM Europe Strategic Value C (acc) EUR
- Morningstar Medalist Rating: Silver
- Morningstar Rating: ★★★★★
The £1.8 billion fund has climbed 29.03% over the past 12 months, outperforming the average fund in its category, which rose 15.85%. The JPMorgan fund, which launched in September 2004, has climbed 18.12% over the past three years and gained 16.30% over the past five years.
M&G (Lux) Investment Funds 1 - M&G (Lux) European Strategic Value Fund
- Share Class: M&G (Lux) Eurp Strat Val JI EUR Acc
- Morningstar Medalist Rating: Gold
- Morningstar Rating: ★★★★★
Over the past 12 months, the £3.9 billion fund has gained 26.85%, while the average fund in its category is up 15.85%. The M&G fund, which launched in September 2018, has climbed 18.32% over the past three years and gained 17.45% over the past five years.
“M&G European Strategic Value rests on solid foundations with a skilled fund manager at its helm and a rounded process that truly stands out, leading to a Process rating upgrade to High.”
“While key-person risk is particularly high here, the manager has built an impressive track record thanks to a disciplined and risk-conscious stock-selection approach.”
- Francesco Paganelli, principal
