Funds that invest in European stocks, particularly small caps, have racked up impressive gains in recent years.
For the one-year period through August 31, the average European equity portfolio leapt 21.3%, almost doubling the 11.2% return of the S&P 500 Index. Over five years, the average European fund edged up 1.5%, versus a loss of 2.1% for the index.
The top performer in the sector over the past 12 months was the $85 million AIM European Small Company Fund (ESMAX), which soared 43.3%. Lead managers Jason Holzer and Borge Endresen seek small- and micro-cap companies that have delivered double-digit annual growth and can sustain such robust gains.
The portfolio is broadly diversified: It holds 105 stocks, while the top 10 holdings only account for 17% of total assets. While the fund focuses on Western European investments–almost half its assets are parked in the U.K. and France–five other countries have significant allocations.