Euro 2024: FundCalibre’s starting XI

Euro 2024 gets underway this Friday with 24 teams from across the continent battling out to win the Henri Delaunay Cup.

While the festival of football starts with hosts Germany facing Scotland in Munich, it is actually England who are favourites to win the tournament and end almost 60 years of trophy-less pain. However, there will be plenty of other countries with big name players, who believe they are capable of taking home the crown.

But history tells us picking the best players does not always make for the best team. It is usually the team with the best balance that ultimately comes out on top.

With this in mind, we’ve chosen eleven of FundCalibre’s Elite Rated managers for our starting line-up.

Goalkeeper

In goal, we’re looking for a tried and tested fund manager and a portfolio with capital preservation at the heart of the investment process. Step forward Stephen Snowden and the Artemis Short-Duration Strategic Bond fund.

This fund typically holds between 100-130 holdings across government bonds, investment-grade and high-yield bonds as conditions change – although it should be noted that high-yield exposure is limited with no bonds rated CCC (or lower) held at purchase. The ‘short duration’ focus on bonds with five years or less to maturity should make it less volatile than the wider bond market. Stephen can also use derivatives, like credit default swaps, or futures to reduce risk and manage the fund’s duration.

The fund has produced a positive return in four of the past five calendar years* and also offers an attractive distribution yield of 5.21%**.

In Defence

Although defenders by name, we want a back four to offer a bit of an attacking threat as well, particularly the two full-backs.

Our first full-back is BlackRock European Absolute Alpha, co-managed by Stefan Gries and Stephanie Bothwell. This long/short pan-European equity fund has a focus on capital preservation and low levels of volatility. It has produced a positive return in eight of the past 10 calendar years* but, importantly, it has also outperformed its peers over the long term. In the past five years, it has returned almost 30% to investors, almost double the average fund in the Investment Association Targeted Absolute Return sector (16.9%)***.

The other full-back is the M&G Emerging Markets Bond fund. The fund has the flexibility to invest in both government and corporate bonds, denominated in local currencies or US dollar. The manager uses her vast skillset to analyse the macroeconomic environment and individual companies to pick what she believes to be the best mix of bonds for this portfolio. It also has a distribution yield of almost 7%****.

Our two centre-backs are the Invesco Corporate Bond fund and the Jupiter Merlin Income Portfolio. The Invesco fund has an unconstrained approach, with a minimum of 80% invested in sterling-based investment grade bonds. The managers aim to identify opportunities missed by the market in order to generate both income and some capital growth, over the long term. The Jupiter Merlin Income fund is a stalwart in the multi-asset sector – and has been designed to provide an immediate and growing income, with the potential for capital growth too.

In Midfield

In our view, midfield is where these types of tournaments are won and lost. It’s the area of the pitch where creativity stems, where defence transitions into attack. You need a bit of everything from goals and flair to bravery – and, crucially, control of the game.

Therefore, we’re going to start with a couple of style agnostic portfolios for this. The first is the Rathbone Income fund. The fund has one of the best – if not the best – track records among open-ended funds for paying dividends. Manager Carl Stick maintains a concentrated portfolio of between 30 and 50 holdings, all of which are chosen for their high quality and visibility of earnings. Carl is somewhat of a contrarian investor, so the fund may lag behind while his peers ‘catch up with the news’.

The second is the Janus Henderson European Selected Opportunities fund, a 40-50 stock portfolio which mixes mega and large blue-chip holdings with some mid-caps to achieve additional sources of alpha. The managers seek to capture investment opportunities through correctly anticipating change and inflection points in companies and industries – for better or for worse.

Our final choice in midfield is the CCLA Better World Global Equity fund. Managed by Charlotte Ryland, the fund targets businesses with stable and persistent growth, trading at attractive valuations. The 70-90 stock portfolio is benchmark agnostic and has proven to be a very successful strategy since its launch in 2022, with the fund providing strong returns.

In Attack

In attack, we want more high-octane performance. Hence, we start with Fidelity China Special Situations. The re-rating of China’s equity market has been indiscriminate, having fallen over 40% since February 2021^, and that has created plenty of valuation opportunities. With a bias towards smaller and medium-sized companies in a developing market, this trust is not for the faint-hearted, but manager Dale Nicholls has consistently outperformed his peers and the trust is on an attractive 10% discount^^.

Professional investors? Read more: Is China compelling value or uninvestable?

Our final two choices are UK-focused in the shape of the Liontrust UK Smaller Companies fund and the Schroder British Opportunities Trust (SBOT). Small-caps have once again been in the eye of the storm, but they have started to see a bit of a recovery and – coupled with increased M&A activity and attractive valuations – could be an incredibly attractive opportunity from here.

Backed by a market-leading team, the Liontrust fund has a very clearly-defined investment process, based on intangible strengths. Every stock in the portfolio must have intellectual property, a strong distribution network or recurring revenues. Despite the challenges of the past decade, the fund has returned 152% to investors^^^.

Investing in both public and private businesses, SBOT targets two specific companies types: ‘high growth’ firms which are set to benefit from the rapid change in corporate and consumer behaviour; and ‘mispriced-growth’ companies, which offer products and services with long-term structural growth drivers. Although performance has held up well relative to its peers^^ sentiment has been hit hard, with the trust at a near 35% discount^^.

*Source: FE Analytics, total returns in sterling, discrete calendar year performance, at 4 June 2024

**Source: Artemis Fund Managers, at 4 June 2024

***Source: FE fundinfo, total returns in sterling, from 4 June 2019 to 4 June 2024

****Source: fund factsheet, 30 April 2024

^Source: FE Analytics, total returns in sterling for MSCI China, from 2 February 2021 to 30 May 2024

^^Source: FE fundinfo, at 3 June 2024

^^^Source: FE Analytics, total returns in sterling, from 4 June 2014 to 4 June 2024