“we do not have energy in the portfolio” analysis Threadneedle (Lux) European Select.

Do you think 2022 is going to be the year for European equities after years of better performance on Wall Street?

We have good prospects for growth in Europe and it is true that, by valuation, the US has done much better than Europe in recent years because sectors such as technology, with less weight in Europe, have done better. We are positive not only that Europe is going to do better, but also because there is a greater inflow of global flows in European equities.

– The Threadneedle (Lux) European Select is a fund that buys well-known European companies, without excluding capitalization. What must a company have to be part of this fund?
It is, by far, one of the star funds of the house, which has more than 50 billion under management in European equities. The companies that managers are looking for are those that have differential advantages, companies that are better because they have a product, service or barriers to entry that make them stronger against the competition and that prevents other companies from copying their products and that in environments less volatile continue to have great solidity and consistency in results. These types of companies, the best 40 in Europe, are part of the fund.

– In the investment process, do they include ESG factors? Do they exclude sectors?
We started with the integration of sustainability factors many years ago. From a fundamental point of view, in this analysis of the companies, we have our own rating and external rating to assess the sustainability of the companies because we have realized that the differential advantages are correlated with their behavior with respect to sustainability, environment and other factors. We have integrated this into our management style with good behavioral results.

– The fund has beaten its category in recent years, but at the beginning of the year, what category does it worse? What reason do you see for this?
What is happening is absolutely normal, that this fund does worse than the index due to the style of companies it selects, which are securities that in the medium and long term are going to do better than the market. What has happened in the last 2-3 months is that everything related to energy has performed spectacularly and funds that do not have energy, like ours, will perform worse. But, I insist on the idea that investment funds are medium and long-term vehicles. It is NOT about doing it well in two months, but rather about having a vehicle that cumulatively generates profitability and that is what our fund achieves.

And why doesn’t it have power? The companies that we have in our portfolio are those whose entry barriers make them have consistency in benefits. We believe that in the energy sector it is very difficult to find this type of company because we believe that it is very difficult to anticipate what the price of oil will be and therefore it is difficult to find companies that are truly differential and that have the power to generate profits in the long term. . We as active managers do not have any ability to anticipate the movements of oil and, therefore, we cannot add value in a sector that moves to the beat of the raw material. With what is happening now is normal.

How will the fund behave? If in six weeks the energy has increased by +23%, we understand that this will not happen consistently. We believe that this is not sustainable and what we seek with a fund of these characteristics is to generate an accumulated and sustainable return and, in certain short-term periods, it may be that it does worse.