Using the Lipper Leaders scoring system to analyse the best performing funds in the IA Europe ex UK sector.
There’s an investment cliché that goes “Brazil is the country of the future… and always will be”. I do wonder if the same description could be applied to continental Europe. Over the past year and more, many investors have been getting somewhat restive over their previous love affair with US equities. The heavily concentrated nature of the US equity market, not to mention the related bet on AI, and then the added political volatility… it’s certainly enough to make you think you should download one of those dating apps and see what else is out there.
Some £19.34bn was withdrawn from IA North America funds over the 12 months to the end of March. Meanwhile, £9bn of that has flowed into Europe ex UK funds. Contrast that with the situation this time last year, and three years, when North America sector funds had attracted about £65bn of UK investors’ money, while more than £13bn was pulled from Europe ex-UK sector funds.
Nevertheless, despite this understandable disquiet, the large-cap Russell 1000, as of late April, is ahead of the UK and European indices not only over three years, but also over 12 months. Things looks slightly different regarding Investment Association fund sectors. While North America is still well ahead of Europe ex UK over three years (42.49% versus 28.96% respectively), European funds creep ahead over one year (11.38% versus 12.24%).
So, the argument is getting some traction, even if the numbers aren’t quite there to justify it yet.
There are certainly diversification benefits from reallocating to Europe, in contrast to global and US equity indices. Sector-wise, it looks very different from the US equity market, and also from the global—as, indeed, does the UK. The biggest sector weight in the FTSE Developed Europe ex UK Index is Financials (23.55%) followed by Industrials (19.98%) and Healthcare (13.43%) as of 31 March 2026. Technology is less than 10%, in contrast to the 37.14%—the largest single sector—of the Russell 1000. Note, though, that Europe’s tech exposure is still well above the 2.33% technology weight in the FTSE 100.
When I covered the sector a year ago, I noted that six out of the 10 funds in the table below were index trackers. While that’s still the case, with one exception— Xtrackers Euro Stoxx Quality Dividend—they are different trackers. Last year there was a pronounced bias to the Eurostoxx 50 large caps; this time, it’s dividend index strategies.
The proliferation of trackers illustrates that Europe is a difficult market for fund managers to beat the index in. As passives typically come cheaper than actively managed funds, such vehicles are worth considering as core portfolio components.
A related factor to dividend outperformance is that all funds in the top 10 are value in style, with most being multi-cap. Over 12 months, the factors of value and yield have beaten the benchmark, according to FTSE Russell analysis. If inflation picks up, this may persist, as growth companies tend be more leveraged, and therefore more rate-sensitive.
However, despite tis preponderance of trackers, the top over three years is again Artemis SmartGARP European Equity—an actively managed fund. Its SmartGARP tool screens financial characteristics of companies in its universe to identify those that are growing faster than the market but are trading on lower valuations. GARP stands for Growth At a Reasonable Price.
WS Ardtur Continental European also retains its place from last year’s top 10. Its largest sector allocation is to Energy, which has likely helped over the first quarter (up more than 16%, with the sector average being down almost 3%).
Table 1: Top-Performing Europe ex UK Funds Over Three Years (with a minimum five-year history)
All data as of March 31, 2026; Calculations in GBP
Source: LSEG Lipper
This was first published on p23 of the May edition on Moneyfacts.
LSEG Lipper delivers data on more than 380,000 collective investments in 113 countries. Find out more.
The views expressed are the views of the author and not necessarily those of LSEG Lipper. This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. LSEG Lipper cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.
