The European funds that are having a great year

Since the US/Israel war with Iran began two months ago, it’s been a rollercoaster ride for European stocks. The region enjoyed an excellent 2025, and all was going well in early 2026 – but March and April were tough, and above all, volatile.

In the first four months of 2026, the MSCI Europe ex UK index has risen around 1 per cent, despite being up 7 per cent in January and February. What’s to come will depend on how the war, and specifically the blockade of the Strait of Hormuz, unfolds. Certainly, the widespread optimism that characterised the second half of last year has taken a serious hit.

However, a few active funds are defying the doom and delivering more than respectable returns. The table below lists the best-performing funds investing in Europe (excluding the UK) since the start of 2026.

Two standout performers

Premier Miton European Opportunities (GB00BYZ55N51) stands out not just because it has returned more than 14 per cent this year, but also because roughly two-thirds of that gain was accumulated in the past two months, while others were struggling.

The fund operates a ‘quality’ strategy. The managers look for around 50 companies that are increasing revenues, margins and returns on capital, with a keen eye on valuations, while owning stocks for a long period. They invest across the market cap spectrum, but have a bias towards midsized companies, which make up about two-thirds of the portfolio.

This sort of approach has certainly not been in favour in recent years, and a look at the fund’s longer-term performance confirms that. Over the decade, it has been one of the best-performing funds in its sector, but most of that outperformance was achieved before 2021. Since then, value strategies have been the winning play in Europe, as in the UK.

Given that we haven’t seen a quality rebound this year, the drivers of the fund’s performance are worth examining. The simple answer is that some of its bets in the technology and healthcare sectors are really paying off.

Swiss drugmaker PolyPeptide Group (CH:PPGN) has seen takeover interest from private equity as it scales up its anti-obesity drug manufacturing plant. Semiconductor stocks ASM International (NL:ASM), Technoprobe (IT:TPRO) and Soitec (FR:SOI) have all performed strongly. These four are the fund’s biggest holdings and account for more than a fifth of the portfolio, and their share prices are up 59 per cent, 50 per cent, 42 per cent and 410 per cent respectively in the year to date, in local currency terms.

It’s difficult to say whether these are one-offs or the start of a new glory period for the fund, but the managers are optimistic about its tech exposure in particular. In March, they noted that global semiconductor manufacturing leader TSMC (TW:2990) was struggling to keep up with demand, and added: “We think the next 18 months could see a super cycle in semiconductor fabrication plant capex and hence equipment orders.”

Meanwhile, WS Ardtur Continental European’s (GB00BYX3YX40) table-topping performance is less surprising, and is a continuation of the success seen in the past five years. This is a concentrated value fund with just 26 holdings, and the top 10 accounts for more than 60 per cent of the portfolio.

The fund has undergone significant changes over the past year, and the managers are reducing risk in reaction to the war. At the end of June last year, financials accounted for nearly a quarter of the portfolio; this has now been dramatically reduced to about 2-3 per cent as at the end of March. Instead, the largest exposure is now energy (around a quarter of the portfolio), followed by communications (about 18 per cent).

In their first quarter commentary, the managers said they strongly benefited from exposure to energy (which includes Shell (SHEL) as the fund’s sole UK stock).

They added: “Given the uncertainty on the range of outcomes from the Middle East conflict, in March we also made further changes, most notably we exited the fund’s most sensitive consumer positions in H&M (SE:HM-B), RTL (DE:RRTL), and Ryanair (IE:RYA). Consequently, the fund is currently running with an elevated cash position of circa 20 per cent as a margin of safety.”

Investors don’t pay active fees for a fund manager to be in cash, so it will be interesting to see when and how this is redeployed.

The others

While the two funds above have offered truly exceptional performance, the others have been a little less impressive.

Jupiter European (GB00B5STJW84) has a very middle-of-the-road record in the medium and long term, but is doing well this year. The managers say they take a style-agnostic approach and focus on return on capital as a metric – eyeing up companies that allocate capital well and can show that their return on capital employed beats their cost of capital.

At the end of March, the fund had 39 holdings focused on financials and industrials, which accounted for 23 and 18 per cent of the portfolio, respectively. The biggest holdings are German stock market company Deutsche Boerse (DE:DB1), which is up a healthy 20 per cent in 2026, and French energy giant TotalEnergies (FR:TTE).

WS Lightman European (GB00BGPFJN79) launched in 2019 and has shown fairly consistent outperformance over the past five years thanks to its value approach. The top sectors in its portfolio are consumer staples, communications and energy. Together with Premier Miton, it is the only fund on the list with a FundCalibre ‘elite’ rating.

As the agency’s analysts put it: “Performance has been excellent. However, it has been far from a smooth journey, and we expect this to continue. This is the sort of fund that is likely to either be at the top or the bottom of the performance charts, in any one year, depending on whether or not its style is in or out of favour.”

While the fund does not technically invest in the UK, as at the end of March it held Shell, Unilever (ULVR) and Magnum Ice Cream Company (MICC) in its top 10, so domestic investors should be wary of the overlap.

Finally, Artemis SmartGARP European Equity (GB00B2PLJD73), a fund we have covered in-depth, has by some distance been the top performer over the past five years and continues to do fairly well. It still invests around two-fifths of the fund in financials, so it is very much a play on that sector.