European Equity Income - July Commentary

This is a marketing communication. Please refer to the prospectus, supplement and KID/KIID for the Funds before making any final investment decisions. The value of this investment can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you invested.  

Past performance does not predict future returns. 

In Q2 2025, the Guinness European Equity Income Fund produced a total return of +7.6% (in GBP) versus the MSCI Europe ex UK Index return of +5.6%. The fund therefore outperformed the index by 2.0 percentage points over the quarter.

At the strategy level, Technology, Financials and Industrials led performance. In Financials, our long-standing insurance holding Mapfre continued its strong run, helped by a sharply improved backdrop in Latin America. In Industrials, new fund holding SPIE did well against an improving outlook for electrical infrastructure spending notably in Germany, and Legrand traded well amid continued strong global capital expenditure on data centres.

European markets continued to be well supported in Q2 2025 following a strong first quarter. Markets looked through the tariff noise and put more weight on a combination of relative valuations, a weaker dollar and the tangible signs that Europe appears to be taking action to address some of the barriers to growth that have held it back in recent years.

One such example is the announcement of the debt brake being ‘released’ in Germany. Germany’s fiscal headroom stands in stark contrast to the US, which has a significantly higher debt-to-GDP ratio and a much more constrained fiscal position. Even with German debt as a percentage of GDP predicted to rise from the current 62% to approximately 70% through 2030, these levels are still far below US government debt as a share of GDP today.

Data as of June 2025. Source: Bloomberg

In the face of US tariffs and the related risk of Chinese overcapacities flooding Europe and other non-US destinations, we would expect the EU to continue to display an improved esprit de corps along with moves to drive greater internal demand through industrially-focused fiscal policy, like Germany’s €1trn stimulus, and other regulatory and financial measures such as the Savings and Investments Union. The opportunity is significant; the IMF estimates that Europe’s internal barriers are equivalent to tariffs of 45% on manufacturing and 110% for services, and trade across EU countries is less than half the level of trade across US states. Private households hold approximately one-third of their financial assets in cash. Mobilising just 5% of that for investments would free up some €1.8trn or approximately 11% of GDP.

In Q2, the fund made two portfolio changes, buying BE Semiconductor (Netherlands) against the sale of TietoEvry (Finland) in the Information Technology sector, and buying SPIE SA (France) against the sale of ABB (Switzerland) in the Industrials sector. The changes resulted in an overall improvement to the quality and growth metrics for the portfolio while valuation and dividend metrics remained broadly unchanged.

Past performance does not predict future returns

Fund launch: 19.12.2013

Source: FE fundinfo. Net of fees. Investors should note that fees and expenses are charged to the capital of the Fund. This reduces the return on your investment by an amount equivalent to the Ongoing Charges Figure (OCF). The OCF for the calendar year 2024 for the share class used for the fund performance returns was 0.89%. Returns for share classes with a different OCF will vary accordingly. Transaction costs also apply and are incurred when a fund buys or sells holdings. The performance returns do not reflect any initial charge; any such charge will also reduce the return.

The value of this investment can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you invested.
 

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