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8th March 2016

Niall Gallagher, manager of GAM Star Continental European Equity, offers his thoughts on Europe

Recently, Ryan Lightfoot-Brown, research analyst for FundCalibre, met Niall Gallagher, manager of the newly-rated GAM Star Continental European Equity fund, to find out his thoughts on Europe.

What's your background?

I spent nine years at BlackRock, primarily as an analyst on European equities, and started to manage funds in 2003. I then moved to T. Rowe Price for a time before joining GAM in 2009.

What's your investment philosophy?

My aim is to grow the wealth of my investors but with careful due diligence. I like to run a highly concentrated portfolio of around 35-40 stocks, although it can range from 30-50. These companies are typically medium to large in size and from all over the region. Turnover is usually low, as I stick with companies for the long term – around five to six years. In some cases I study a company for many months before actually investing. When it comes to selling a company I prefer to trim my holdings and reload when the investment case is better, rather than selling out altogether if it reaches my target price.

How do you view the macroeconomic environment?

For the last few years, when writing about Europe, a significant component of our commentary and analysis has focused on the macroeconomic imbalances in Europe, as well as the reactions to central bank policy. This was necessary, as we saw very substantial value in the asset class from 2010-2013, but recognised that an intrinsic value argument on its own was not going to persuade investors to avail themselves of the fantastic opportunities we saw before us.

We needed to persuade investors that Europe, and in particular the eurozone, was not 'broken', that policymakers had the tools and the intent to set Europe on the road to recovery, and that the recovery would in fact occur. We now feel that this argument has been won and it is time to go back to stock-specifics.

Current accounts have moved from deficit to surplus, austerity is coming to an end and a positive 'fiscal impulse' will support economic growth. The fall in the oil price is a major positive for all European economies as almost all are net importers. The fall in the euro is also positive for eurozone economies and a double positive for European equities. The European banking sector has been substantially re-capitalised and European equities are on the cheap side of fair value.

How is the fund currently positioned?

We like a number of companies in the consumer discretionary, industrials and IT sectors and are less keen on financials. In terms of geographies, our biggest underweight is to the UK and our largest overweight is Ireland, where we really like the reforms that have been undertaken. The same can be said for Spain.

Research the Elite Rated GAM Star Continental European Equity fund


Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Niall's views are his own and do not constitute financial advice.


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