Artemis SmartGARP European Equity Fund
Q2 2025 update
Source for all information: Artemis as at 29 June 2025, unless otherwise stated.
Review of the quarter to 30 June 2025
The Artemis SmartGARP European Equity Fund had a good Q2, rising 13.8% while its FTSE World Europe ex UK index benchmark was up by 6.1%. Over one, three, five and 10 years the fund is pretty much top of the pops. Since we launched it in 2001, it has compounded at 8.9% per annum after fees, compared with 6.8% per annum from the market and 6.4% per annum from the average IA Europe ex UK fund. This annual outperformance of 2.1 percentage points is broadly in line with the excess growth and income that our stocks have delivered over the years.
SmartGARP Europe vs Benchmark
Source: Factset
Returns have been high of late. Having lagged the strong growth in fundamentals in the early 2020s, share prices are now catching up. Through to the end of 2017, the fund had on average traded on valuations that were 20% cheaper than the market. In the subsequent few years, we ended up with a portfolio that was at half the market multiple.
Today the discount has narrowed to nearer 35%, so we are probably just over halfway through the fund's re-rating from being stupidly cheap to pretty cheap. In the meantime, SmartGARP’s ability to uncover stocks that grow about 2 percentage points per annum faster than the market seems to be undiminished. The future still looks bright.
| Performance (%) | 3 m | 6 m | 1 yr | 3 yrs | 5 yrs |
|---|---|---|---|---|---|
| Fund | 13.8 | 32.1 | 33.0 | 105.4 | 138.3 |
| FTSE World Europe ex UK | 6.1 | 14.3 | 9.9 | 49.1 | 64.7 |
| IA Europe excluding UK Average NR | 7.6 | 13.4 | 8.9 | 43.6 | 54.6 |
Past performance is not a guide to the future. Source: Lipper Limited/Artemis as at 30 June 2025 for class I accumulation GBP. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. Classes may have charges or a hedging approach different from those in the IA sector benchmark.
The fund has quality characteristics (return-on-capital-type measures) that are broadly similar to those of the market. However, its holdings upgrade their profit forecasts more often. This means that the actual growth in fundamentals continues to beat that of the benchmark.
To give an example, our five largest stocks have raised their earnings per share (EPS) forecasts by 7% in the past three months, whereas the five largest stocks in the index have cut their EPS forecasts by 1.7% over the same period. This combination of positive surprises and low valuations has helped the fund to perform well.
Contributors/detractors
Our worst performer over the past three months (energy company Equinor) cost us almost 0.4 percentage points of performance (oil prices were weak). However, four stocks more than made up for this poor performance on their own: Société Générale (a French bank), Lottomatica (an Italian lottery provider), Betsson (a Swedish online gaming company) and Italgas (an Italian gas network). So, a diverse bunch of winning stocks by sector and country. The common themes were low valuations and upgrades. We also benefitted from our decision not to own luxury retailer LVMH, which was characterised by the opposite set of characteristics.
We did not own Société Générale before mid-February of this year. It is now our largest position and has been one of the biggest contributors to performance year-to-date. When the data changes, we change our portfolios and are not afraid to do so dramatically.
Activity
Other large purchases in the past few months have included Fresenius Medical Care, TUI, Engie and Italgas. Once again, the common themes were value and upgrades. The chart below illustrates the EPS forecasts of Fresenius against the European market; having fallen for a number of years, it seems that business is improving, but the market has been slow to realise this. The company recently had a capital markets day. Stockbroker analysts begrudgingly raised their profit forecasts and we keenly bought the shares.
Fresenius Medical Care vs MSCI Europe
Source: Factset
Inevitably we make mistakes in our purchases. We tend to cut our losses sooner rather than later and in the past few months we sold out of Ahold Delhaize (due to price wars among food retailers), Equinor (on weaker oil prices), Bic and Evonik (on downgrades).
Outlook
We believe the spread of valuations within European equity markets has got further to narrow – it is still wide and value stocks are delivering pleasant surprises. As such, our value tilt should continue to give us a tailwind, as should our natural tendency to have a high exposure to companies announcing positive surprises.
The fund has a return on equity that is similar to that of the market. However, it sits on a prospective P/E that is 37% below that of the index and has seen upgrades to profit forecasts at a time when those of the benchmark are either flat or down.
Notes and references
Benchmarks: FTSE World Europe ex UK TR; A widely-used indicator of the performance of European stock markets, in which the fund invests. IA Europe Excluding UK NR; A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. These act as ‘comparator benchmarks’ against which the fund’s performance can be compared. Management of the fund is not restricted by these benchmarks.
FOR PROFESSIONAL INVESTORS AND/OR QUALIFIED INVESTORS AND/OR FINANCIAL INTERMEDIARIES ONLY. NOT FOR USE WITH OR BY PRIVATE INVESTORS.
CAPITAL AT RISK. All financial investments involve taking risk and the value of your investment may go down as well as up. This means your investment is not guaranteed and you may not get back as much as you put in. Any income from the investment is also likely to vary and cannot be guaranteed.
This is a marketing communication. Before making any final investment decisions, and to understand the investment risks involved, refer to the fund prospectus (or in the case of investment trusts, Investor Disclosure Document and Articles of Association), available in English, and KIID/KID, available in English and in your local language depending on local country registration, available in the literature library.
Risks specific to Artemis SmartGARP European Equity Fund
- Market volatility risk The value of the fund and any income from it can fall or rise because of movements in stockmarkets, currencies and interest rates, each of which can move irrationally and be affected unpredictably by diverse factors, including political and economic events.
- Currency risk The fund’s assets may be priced in currencies other than the fund base currency. Changes in currency exchange rates can therefore affect the fund's value.
- Charges from capital risk Where charges are taken wholly or partly out of a fund's capital, distributable income may be increased at the expense of capital, which may constrain or erode capital growth.
Important information
The intention of Artemis’ ‘investment insights’ articles is to present objective news, information, data and guidance on finance topics drawn from a diverse collection of sources. Content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or investment by Artemis or any third-party. Potential investors should consider the need for independent financial advice. Any research or analysis has been procured by Artemis for its own use and may be acted on in that connection. The contents of articles are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. Any forward-looking statements are based on Artemis’ current opinions, expectations and projections. Articles are provided to you only incidentally, and any opinions expressed are subject to change without notice. The source for all data is Artemis, unless stated otherwise. The value of an investment, and any income from it, can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested.
