• The  M&G (Lux) European Strategic Value Fund ranks first in our peer assessment. Its combination of strong returns and favourable drawdowns over the past five years supports its competitiveness among the 34 European equity funds we reviewed.

• Across the selected value-led and growth-led years, the fund outperformed the MSCI Europe Value Net Return Index cumulatively, supporting the case for active stock selection beyond passive value exposure.

• A consistent process underpins active decisions. Richard Halle has managed the strategy since 2008, combining low-valuation screening, fundamental checks and selling discipline.

Selective fund choice within a cautious regional allocation

In our 4Q Outlook, we maintained Europe at 2.0 Stars “Not Attractive”. While economic growth and corporate earnings have held up better than expected, inflation has picked up as energy prices have risen, and the ECB has raised rates, with a further increase possible. We also see the upside for European equities as modest compared with markets we rate more highly, such as Asia ex-Japan (4.0 Stars).

Nevertheless, investors may retain European equities for diversification, currency exposure or an established long-term allocation. For these investors, we assessed 34 European equity funds on our platform using a weighted framework comprising performance at 60%, expenses at 20% and risk at 20%. M&G (Lux) European Strategic Value Fund ranked first overall and is our preferred option.

As of 30 September 2026, the fund’s five-year cumulative return was 86.1% in SGD terms, the highest among the 33 funds with a five-year record, while its five-year maximum drawdown of 21.7% was the second smallest. The result provides a basis for examining how the manager selects investments and adjusts the portfolio.

Chart 1: M&G combined a strong five-year return with a relatively small historical drawdown.

A value process with clear buying and selling disciplines

M&G launched the UK’s first unit trust in 1931. Today, M&G Investments belongs to M&G plc, a listed group that also owns the UK insurer behind Prudential-branded products such as PruFund. The group has extensive experience managing both investment funds and long-term insurance assets.

Continuity is one of the strategy’s strengths. Richard Halle, who joined M&G as a sector analyst in 1999, has run the strategy since 2008, including through its UK-authorised predecessor fund, so its long-term record reflects one manager’s process across several market cycles. Deputy manager Shane Kelly and M&G’s wider value team add research depth; the team applies the same philosophy across its European, North American and global value portfolios. The fund itself had net assets of EUR 8.2 billion as of 30 September 2026.

1.       Screen within sectors. The team identifies the cheapest quartile of companies within its sector classifications, using adjusted price-to-book as its primary valuation measure. This produces approximately 300 candidates.

2.       Test the fundamentals. Financial strength, business durability and management behaviour are examined to assess debt, potential dilution, structural decline and capital allocation. A low valuation is the starting point for research, rather than sufficient grounds to invest.

3.       Diversify the portfolio. The fund typically holds 60–100 companies, with 98 holdings as of 31 August 2026. An individual stock’s cumulative active overweight is limited to 3%. Sector and country allocations emerge from bottom-up stock selection.

The team assesses risk and reward over three to five years without relying on precise target prices or short-term catalysts. Reaching the sector median adjusted price-to-book valuation triggers a fundamental review, rather than an automatic sale. A holding may also be sold if it no longer passes the fundamental tests and its risk-reward profile becomes unattractive. The 20.7% turnover rate is consistent with this patient approach.

Bank investments illustrate the process. Following Silicon Valley Bank’s collapse in 2023, European bank shares sold off. The manager judged that stronger capital positions and balance sheets made European banks less vulnerable to the problems in the US, creating attractive entry valuations. The portfolio subsequently benefited from a rally in bank share prices. The manager’s 2025 attribution highlighted BBVA, Bank of Ireland, CaixaBank, Commerzbank and Erste as strong performers.

After the rally, the team took profits and redeployed capital, moving financials to a modest underweight while retaining selected banks. It subsequently added back to some positions during market weakness. This shows how valuation and fundamentals guide both purchases and reductions.

Positioning reflects substantial active choices

An active share of 75.4% indicates substantial differences between the portfolio’s holdings and weights and those of its benchmark. These choices create scope for differentiated returns, but also for meaningful periods of underperformance.

Financials represented 22.3% of assets versus 25.7% in the index. BBVA, Nordea, Erste and Bank of Ireland were nevertheless among the largest active overweights, while HSBC, Santander and Allianz were absent. These positions reflect selective exposure rather than a broad sector bet.

Information technology accounted for 3.3% versus 9.0% in the index, with no holdings in ASML or SAP. This can constrain returns when technology leaders outperform. In August 2026, the manager identified the absence of SAP as the largest individual relative detractor, following strong 2Q26 results and continued share buybacks.

Materials and consumer sectors were overweight. ArcelorMittal and Buzzi featured among materials holdings, while consumer exposure included Ahold Delhaize, Magnum Ice Cream and Michelin. These holdings express the manager’s search for valuation opportunities.

Table 1: Materials and consumer sectors were the largest sector overweights.

Sector	Fund	Index	Active weight (pp)
Materials	9.8%	5.6%	+4.3
Consumer discretionary	10.0%	6.4%	+3.6
Consumer staples	10.6%	8.3%	+2.3
Real estate	2.0%	0.6%	+1.5
Health care	13.0%	12.8%	+0.3
Energy	4.9%	4.9%	-0.1
Utilities	4.3%	4.7%	-0.4
Communication services	2.8%	3.2%	-0.4
Industrials	16.0%	18.8%	-2.8
Financials	22.3%	25.7%	-3.5
Information technology	3.3%	9.0%	-5.8
Cash	1.1%	0.0%	+1.0

Source: M&G Investments, iFAST Compilations.
Data as of 31 August 2026

Table 2: The largest holdings include selected banks and industrial companies.

Holding	Sector	Fund	Index	Active weight (pp)
BBVA	Financials	3.5%	1.1%	+2.4
ArcelorMittal	Materials	2.6%	0.2%	+2.4
Shell	Energy	2.5%	1.8%	+0.8
AstraZeneca	Health care	2.5%	1.7%	+0.8
Siemens	Industrials	2.5%	1.7%	+0.8
Nordea Bank	Financials	2.4%	0.4%	+2.0
Erste Group Bank	Financials	2.4%	0.3%	+2.1
GSK	Health care	2.1%	0.7%	+1.4
Daimler Truck	Industrials	2.1%	0.2%	+1.9
Bank of Ireland	Financials	1.9%	0.2%	+1.8

Source: M&G Investments, iFAST Compilations.
Data as of 31 August 2026

The portfolio also has less exposure to the largest companies. Only 35.2% was invested in companies worth more than EUR 50 billion, versus 65.3% for the index. Switzerland was underweight by 10.4 percentage points, with neither Nestlé nor Novartis held. The portfolio therefore offers a different mix of company sizes and country exposures from the benchmark.

Long-term outperformance with relative downside resilience

As of 30 September 2026, the fund’s USD A Acc share class, measured in SGD, delivered annualised returns of 20.1%, 13.2% and 10.2% over three, five and ten years, outperforming its benchmark over all three periods. The corresponding MSCI Europe Net Return Index figures were 14.9%, 8.1% and 8.4%; STOXX Europe 600 Net Return Index returns were 15.2%, 7.9% and 8.5%.

Chart 2: The fund outperformed both broad-market indices over the available history.

A natural question is whether the fund’s returns simply reflect its value tilt. Across the selected value-led years, it outperformed the broad market and, more importantly, the MSCI Europe Value Net Return Index cumulatively. It also delivered higher cumulative returns than the value index across growth-led years, despite the style headwind. Outperformance against its own investment style in both groups of years supports the case that the manager’s stock selection and portfolio decisions added value beyond passive value exposure.

Chart 3: Across the selected value-led years, the fund outperformed the value index cumulatively.

Chart 4: In growth-led years, the fund generally trailed the broad market but outperformed the value index cumulatively.

The fund’s historical drawdown record compares favourably with peers, with its five-year maximum drawdown the second smallest in our assessment. It also fell less than both MSCI Europe and STOXX Europe 600 in four of the seven selected downturns, and less than the MSCI Europe Value Net Return Index in three.

Chart 5: The fund’s relative resilience varied across market declines.

A preferred option for investors retaining European exposure

We maintain our 2.0 Stars “Not Attractive” rating on European equities, reflecting inflation and interest-rate risks and limited upside relative to other markets. For investors retaining European exposure, M&G (Lux) European Strategic Value A Acc USD is our preferred active option, supported by its overall peer ranking, manager continuity and consistent investment process.

Within Europe, we also favour selected opportunities supported by government expenditure, multi-year investment commitments and the AI cycle, including defence, power infrastructure and selected technology companies. The fund holds less in these areas than the index, so choosing it does not mean following our sector preferences. Its value approach is a different way to hold European equities, and its track record in our assessment supports it as an option for investors who want value-style exposure to Europe.

It may suit investors who accept a clear value bias and potential underperformance when growth stocks lead, and who can hold for at least five years, the fund’s recommended holding period. Its A share classes carry management fees and other costs of 1.69% a year. Those seeking lower-cost index exposure may consider Amundi Core STOXX Europe 600 UCITS ETF Acc (LSE: MEUS).

Related article: Europe 4Q Outlook: More resilient than expected, but the risk-reward remains unattractive.

Declaration

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.