European Assets delivered a 7.4% return on NAV for the year ended 31 December 2016 compared to a 23.3% return on the Euromoney Smaller European Companies Index. The Board has already announced a total dividend for 2017 of Euro 0.7884 per share (2016: Euro 0.912 per share, net of Dutch withholding tax) will be paid. This represents a 13.6% decrease in the 2017 Euro denominated dividend compared with the previous year. The 2017 dividend will be paid in three equal instalments of Euro 0.2628 per share on 31 January, 31 May and 31 August.
Noting the degree of underperformance, the manager says it is important to point out the role momentum has played in stock market returns this year. Wild swings in investor sentiment have meant that momentum dominated large periods during the year. This has dislocated stocks from fundamentals and made stock picking on the basis of fundamentals extremely challenging.
Three stocks delivered negative relative returns worse than 40%, these were Leonteq, Permanent TSB and Betsson. The manager’s statement does not go into detail on these holdings except to say that they have all been sold.
Some stocks were affected adversely by the result of the EU referendum, the manager cites:
- Origin Enterprises: the Irish listed agronomist which advises UK farmers (70% of profits) on improving their crop yields.
- Irish Continental Group: the Irish listed freight and ferry company which operates in a duopoly on the routes between the UK and Ireland. They also operate container terminals in the ports of Dublin and Belfast.
- Grafton: the UK listed (previously Irish listed) builders’ merchant that derives approximately 70% of its profits from the UK and 25% from Ireland.
- IFG Group: the Irish listed financial holding company which owns the high end UK pension administrator James Hay and the UK wealth manager Saunderson House.
EAT : Brexit, stock selection and momentum driven markets blamed for 16% underperformance at European Assets