Powe has been manager of the £71m fund since October 2014 in a return to running retail money following a 13-year period at the head of his own hedge fund business, Powe Capital Management.
He says while European equities are set for a tough time he is bullish that double-digit returns can be made in the beleaguered markets of the eurozone.
“I'm very motivated by absolute return with an objective to deliver returns of at least 10 per cent per annum with GLG Continental Europe. If I can do that on an annualised basis then I will also beat the index by at least three percentage points per annum and will be doing a decent job. It is not going to be every year but the idea is to compound the returns,” he said.
“I have always run money in an index agnostic way without much regard for it. If you liberate yourself from the index it does bestow tremendous advantages. For example, you don’t have to be on top of growth swathes of the index, which frees up time to find other ways to make money.”
Market sentiment towards Europe was on stall for much of last year following a string of economics numbers pointing to weakness in the eurozone’s recovery from the 2011 crisis and the threat of deflation. Despite this, it still performed better than the FTSE All Share.
Performance of indices in 2014
Source: FE Analytics
More recently, numbers out last week which showed deflation is occurring has buoyed sentiment with the market interpreting that this will pave the way for full-blown quantitative easing (QE) from the European Central Bank (ECB).
However, Powe says while QE may boost markets he will be looking to avoid exposure to it.
“If we get full-blown QE then lower quality names will outperform. I'm prepared to not participate in that rally because it will be short-lived. It is not going to solve the problem. It may create asset price inflation but on its own it is not enough to create inflation in the real economy,” Powe said.
“The eurozone economy is going nowhere fast. Economic growth is going to be lacking but there are some mitigating factors. For example the weakness of the euro, sharp falls in the oil price – that is all positive.”
“Against that you have an ageing population and in most of the European economies you have surplus debt, governments hell-bent on reducing their budget deficits and ultimately their debt so fiscal policy is constrained. Eventually you will get supply-side reforms in countries like France and Italy, which badly need their economies to be liberalised.”
He says the short-term impact of this is likely to be more negative than positive for stock markets but argues it will pay off over the longer term.
“If it is made easier to fire people than it used to be, that creates job insecurity. For an economy that is flat at best it is not helpful in the short term but it is much needed. However, if there is supply-side reform led by governments in Italy and other countries then fiscal policy will be stimulative. You might also get some big infrastructure projects.”
Powe adds that monetary policy is going to be loose and the ECB is going to do more and more, expanding its balance sheet. But he says given this investors need to more vigilant than ever of the types of European exposure they hold.
“However, I do believe that genuinely strong companies will at least hold their valuations and you may even get a further re-rating. You will get polarisation in the way the market values success and lack of success,” he explained.
“At the moment, it may be a little bit overcooked in the short term but on a one, three or five-year view it is still the case that companies that provide investors with visibility with a more public-facing view, where their earnings growth is pretty clear from what they are planning and it is not dependent on the European economy.”
“I'm not just advocating sticking to safe stocks but companies where there is something very positive going on, where they have a clear competitive advantage.”
Since Powe took over the fund it is up 8.58 per cent while the IA Europe ex UK sector has made 1.25 per cent and the FTSE Europe ex UK index is down 0.69 per cent.
Performance of fund, sector and index since 1 Oct 2014
Source: FE Analytics
It has a clean OCF of 1.05 per cent.