Still A Lot to Like in Europe
According to a fund manager who specializes in European equities, there are plenty of opportunities in the Old World for the patient, quality-oriented investor, says Ben Shepherd of Investing Daily.
With all the structural problems plaguing European economies, most investors now take a dim view toward the continent.
But Matthew Benkendorf, manager of Virtus Greater European Opportunities (VGEAX), has successfully navigated these treacherous markets. His fund ranks among the top 1% of European equity funds, according to Morningstar.
We recently spoke with Benkendorf about his outlook for the region.
Ben Shepherd: What is your outlook for Europe?
Matthew Benkendorf: Europe made a critical error with its response to the 2008 credit crisis.
During that crisis, the US initiated programs such as the Troubled Asset Relief Program (TARP), which it used to infuse banks with capital. Although that may not have been the intended purpose of TARP, injecting banks with capital and then forcing them to raise additional capital turned out to be the right course of action.
European banks did raise some capital at that point in time, but they didn’t do so to the fullest extent necessary. Instead they took a piecemeal approach, with the hope that the resulting growth from an eventual economic recovery would obviate the need for additional borrowing.
Even after the equity markets finally rallied off their lows, European regulators failed to push the banks to strengthen their balance sheets by raising additional capital.
One can draw a simple contrast between the relative strength of US and European banks with basic metrics.