On the Mend: Europe’s Move to Recovery

Looking ahead at 2014, Peak said that for some of those former winners, "in some cases the negative price action has gone a little bit too far. There will be some interesting, almost contrarian plays being presented to us next year, and clearly the ability to select halfway decently will be important in terms of performance. Trying to keep on top of those and get our timing and judgment correct is going to be pretty much the deciding factor for a successful 2014."

Another source of opportunity in 2014 will be mergers and acquisitions, Peak said. "We've seen a number of interesting, big deals. The IPO market in Europe has been picking up a little bit. We have had suppressed M&A for a while in Europe, but I think the signs and signals are that it is picking up. That will probably create some additional opportunities for investors."

The European Focus Fund invests in public companies in both the U.K. and on the continent, Peak said, with three very simple objectives: "One is to make some money for our clients. The second one is to beat the market; in other words, justify being active. And the third objective is to beat the competition. If we can do all three, then I think everyone will be thrilled."

While the markets aren't entirely cooperative yet, the fund has performed well lately. As of Jan. 10, the fund's one-year return was 34.78%.

"We've managed to get more things right than wrong this year," Peak said. "At the end of November, the fund was up about 30% in round numbers, and that compares to the MSCI Europe up about 13%, so significant outperformance for the year. Longer term, we've had a very good 12-year record. We clearly rank in the top decile of the category. It's a record I'm very proud of. As they say, the past is no guide to the future, but we want to obviously keep the credentials of the fund intact."

Peak said he follows three principles in managing the fund. "No. 1, this is a bottom-up fund. No. 2, it's really a blend style. There's no significant growth flavor; there's no significant value flavor. It's a blend of best ideas. And the third building block is we have the ability to go all-cap." Peak looks at and invests in the "very biggest companies" all the way down to small-cap firms "when the time is right and the opportunity is right."

"The overall idea of this fund is we appreciate that in the American market, clients are never going to have two, three, four, five funds in Europe. They're probably only going to have one," he said. "So if we have a fund that has the ability to be an all-weather fund rather than something that only performs when value is in or when growth is in or when small-cap is in, clients can hold this. It's a multi-year hold, rather than something where they need to worry about the seasonality of the fund or the style of the fund."

At almost $720 million in assets as of Jan. 8, Peak called the fund "a good size" and expects it to continue growing as more U.S. investors are attracted to Europe. "The U.S. has been a great place to be, but it's trading at all-time highs, and we think there are more opportunities outside of the United States. International markets and Europe in particular [are playing] catch up to the relative economic success that we've seen in the U.S. On the back of that, Europe's high was back in 2007; to get back to that high, the markets would have to move up 30%. That doesn't mean they will go up 30%, but it's an interesting contrast to the domestic equity success that American investors have enjoyed. I think it's a good argument for diversification. Beyond that, there's a very good investment return argument that we would encourage clients and their advisors to think very hard about in terms of their mix of exposure. We'd argue for more international and less domestic."