CRUX European Special Situations

Daniel Lane

Daniel Lane - Fidelity Personal Investing

“I’m much more focused on finding good companies than pushing Europe.” says Richard Pease, co-manager of the FP CRUX European Special Situations Fund, a Fidelity Select 50 fund.

While the manager says there are currently many reasons to look to Europe in particular for investment opportunities, he finds real inspiration in those few businesses breaking out of the continent with operations across the world.

“The companies in the fund are born in Europe, but they do travel. If you were born in a rather small economy like Finland or Holland it would be a shame if you couldn’t travel. There is a perfectly good story for Europe but what we’re trying to do is find the global-class businesses which happen to be born there.”

The ability to expand the relevance of a business beyond its immediate borders is important to Pease, for whom the chance of being a big fish in a small pond isn’t attractive. He says: “The risk of being a champion in a small economy is that the big guy comes in from left field and the whole game changes. That’s not the risk we want to take.”

And while the manager has no inherent sector biases when picking companies for the fund, his selection criteria often naturally weed out certain parts of the market.

Pease specifically looks out for capital-light companies with a high degree of recurring earnings, which he hopes can prove resilient even in uncertain markets. Equally important to the CRUX manager is good quality management steering a business, who are incentivised by a shared ownership of the company’s future fortunes.

This rules out a lot of capital intensive areas like oil, steel or cement. As Pease explains: “We avoid companies that have to spend a lot of money and then, should the rules change in the countries they operate in, run the risk of losing your money. So, we tend to focus on service businesses which are much easier to grow and can give a decent dividend en route, too, which is obviously very helpful for shareholders.”

A good example of resilience and international spread is Swiss bonding and sealant company Sika, a top holding in the fund. Founded over 100 years ago, Sika has developed a global presence with a leading position in product development for the building and motor industries. Likewise, global information services company Wolters Kluwer, another main holding, can trace its roots back to 1836 when it started life as a Dutch publishing house.

Normally, these are characteristics of a growth-oriented fund but Pease is more pragmatic in the binary “value or growth” debate. He explains: “We all want growth, it’s just a question of how certain it is and how much we’re prepared to pay for it. The future is always uncertain so we’re a little bit cautious about paying too much - I don’t know quite where that means we’d be in someone’s style boxes but the essence is we would like growth but not to pay too much.”

For more on the FP CRUX European Special Situations Fund, visit the fund factsheet

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.