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European Equity

Investing primarily in the shares of European-domiciled companies, this strategy is research-driven and focused on bottom-up stock selection, not bold calls on macro or geopolitical conditions.

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European Equity strategy differentiators

  • Capitalize on dislocations between market expectations and our assessment of free cash flow growth

  • Integrate fundamental investment analysis, behavioral finance and a multi-dimensional view of portfolio construction

  • Focus on idiosyncratic (stock specific) portfolio risk with no systematic style or other factor biases

  • Deliver core portfolios with the ability to outperform under a variety market backdrops

We believe free cash flows (FCF) are the best measure of economic value creation and are a strong indicator of forward returns.

  • Forward FCF yield combines growth and valuation.

  • Forward FCF yield analysis cannot be passively replicated.

  • Over long time periods, analysis indicates companies with higher forward FCF yields outperformed regardless of prevalent market style.

Analysis of returns when dividing the Global Developed ex U.S. Markets into quintiles based on One-year forward free cash flow yield

Demonstrates relative returns of 1-year forward free cash flow yield by quintile
Data from January 1, 1987-December 31, 2024. Source: Empirical Research Partners Analysis. Monthly returns compounded and annualized. Does not reflect the performance of an investment product. Market performance does not reflect the impact of fees, expenses, and transaction costs of investing. Free cash flow is a measure of profitability accounting for all sources and uses of cash, including capital expenditures and acquisitions.

Strategy facts

  • Manager

    Principal Equities

  • Inception

    1 April 2000

  • Index

    MSCI Europe NTR Index

  • Targeted number of holdings

    60-100

  • Expected turnover

    30-50%

  • Investment vehicles

    IMA, UCITS Fund

  • Style

    Core, all-weather profile

  • Tracking error

    200-400 bps (ex-post)

  • Information ratio

    0.5 over full investment cycle

Portfolio management

Principal Equities

We believe bottom-up stock selection is the most reliable and repeatable source of consistent performance. Through focused fundamental research and disciplined risk management, we strive to take advantage of persistent behavioral biases and impediments to capital flows, which often create market inefficiencies and opportunities.

Chief Investment Officer & Global Head of Equities, Portfolio Manager
George P. Maris, CFA
27 years of experience
Deputy Chief Investment Officer, Portfolio Manager
Matthew Peron
33 years of experience
Portfolio Manager
Paul H. Blankenhagen, CFA
33 years of experience
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Past performance does not guarantee future results.

Investing involves risk, including possible loss of principal.

Equity markets are subject to many factors, including economic conditions, government regulations, market sentiment, local and international political events, and environmental and technological issues that may impact return and volatility.

Investment guidelines are subject to change.

Not all investment options are available in all jurisdictions. Certain vehicles have not been registered with the United States Securities and Exchange Commission under the United States Securities Act of 1933 and may not be directly or indirectly offered or sold in the United States or to any United States person.

The MSCI Europe Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets in Europe. Information regarding the comparison to the MSCI Europe Index is available upon request.

Principal Equities is an investment team within Principal Global Investors.