Exploring ESG: not everything is black and white
Since lockdown started, I’ve played more games of Uno, Battleships and Gin Rummy than I care to...
European markets have had a good year. A large part of the optimism surrounding the continent emanates from France’s new leader, Emmanuel Macron, who defeated Eurosceptic candidate Marine Le Pen in May to become the country’s youngest ever president at 39 years old.
Hailed as ‘Europe’s saviour?’ by a rather effusive Economist cover soon after his election (albeit with a question mark), Macron will no doubt have his work cut out for him achieving the to-do list the world has assigned him. He is a relatively inexperienced politician, as are the rest of his newly-formed En Marche! centrist party, who have vowed, alongside Angela Merkel, to reform the European Union. Let’s hope he has youthful energy on his side, as the pledge will not be an easy one to fulfil.
For the first time in a long time, however, Europe’s metrics are also moving in the right direction. Inflation is rising slowly after several years of deflation and unemployment numbers have been falling. The economic growth forecast is solid and the most recent corporate earnings season saw several companies upgrade their earnings outlook.
Against this backdrop, investors have flocked to European equities in 2017, seeing a chance to get into a ‘recovering’ market while valuations remain more reasonable than they currently are in US and UK stock markets.
So if you’re a Francophile planning to celebrate with the obligatory wine and cheese this evening, here are three Elite Funds that have roughly a fifth of their holdings in France for you to ponder while you sip your Beaujolais. Bonne fête nationale!
Manager Niall Gallagher believes the outlook for France is strong since the election, with hopes for structural reform significantly raised. Some of the underlying productivity data for France is very good, he says, and if Macron can manage to liberalise the labour market and reduce the tax burden, the economy may get quite a boost under his care. This fund invests in around 30 to 50 large companies that Niall’s analysis reveals have the possibility to grow faster than the market.
Run by French manager Cédric de Fonclare, this fund invests in mostly large businesses that are high quality but trading at reasonable prices. Around 10% is also allocated to medium-sized firms. Cédric’s top ten stocks include French telecomms company Iliad and construction company Vinci. He has exposure to diverse industries including industrials, consumer goods, technology, healthcare and finance.
With French firms among its top ten including Kering—the luxury goods holding company that owns fashion labels such as Balenciaga, Gucci and Saint Laurent Paris—as well as a French civil engineering business, Eiffage, this fund focuses on companies with a likelihood of earnings and growth surprise. It is run by Alister Hibbert and has a lot of flexibility in terms of the countries, companies and sectors in which it invests. BlackRock’s European team are extremely well-regarded.
^Fund factsheets, dated 30 June 2017