The European Equity Investment Process

Abstract

A survey of 32 asset managers looks at the asset management industry9s approach to the European equity investment process. Most managers invest money following a large-cap blend style, and do not deviate substantially from popular benchmarks such as the MSCI Europe. The majority of the European equity managers have a bottom-up investment process, in which input for stock selection comes both from qualitative and quantitative analysis. Qualitative research mainly looks to the quality of the management of a company and its strategy; quantitative analysis usually is based on the key measures of profitability and valuation. There is no consensus as to a distinction between the function of an analyst and the function of a fund manager. Most European equity analysts operate on a sector basis. The interest rate cycle, inflation, economic growth, and corporate earnings growth are considered the driving factors in asset allocation. While there are differences among managers, investment approaches have a number of common features.