Last year we had done a cover story deliberating the case for investing in the US. In recent times two AMCs have launched Euro-focused funds: JP Morgan and Religare Invesco. A third fund from the DWS stable has seen a change in investment mandate from a broad DWS Global Thematic Offshore Fund to DWS Top Euroland Offshore Fund.
With political and economic stability back in Europe, the case for investing in the continent is fast finding takers. Aside from the global diversification (See: Pays to diversify), many of these businesses are well known like Nestle, Unilever, Deutsche Bank and Zara and feature in the Fortune 500 list and based across Europe.
The region has seen an improvement in its current account balance with pick-up in exports and contraction of imports. And, many countries are expected to benefit from a pick up in the US economy as Europe remains a large export economy accounting for a fifth of the GDP of the European Union region.
But all is not rosy with Europe; the low growth environment in Europe is expected to stay for some more time. Moreover, investments in these funds also face the double edged sword of currency fluctuations as investors can gain or lose due to currency fluctuations. Likewise, investors will incur dual expenses when investing in these funds because of the two separate layers of fees charged by these funds.
But there is the possibility to benefit from the undervalued state of Europe which provides an opportunity to invest at a lower PE. European stocks can offer reasonable returns though it still remains volatile.
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