Andrew Merricks, head of investments at Skerritts consultants, suggests that, for those investors willing to take on more risk, Europe may not be such a bad idea.

Hands up all of you who think that Europe is the best place in the world to invest right now. I thought so. A mere handful of you. I’ve been keeping my hand down too in recent months.

Surely the euro zone is paralysed through bureaucracy; split to its core by the effects of the single currency upon the weaker member states of Portugal, Ireland, Greece and Spain (the PIGS as they have become known); suffering from the effects of being too slow to cut interest rates; most liable to further banking crises as pressure is exerted upon the capital requirements of the numerous institutions that refuse to merge with one another. All in all, Europe is the last place to look as the world emerges blinking from the hurricane that has whipped through the global system. Isn’t it?

Not according to Barry Norris, manager of the Ignis Argonaut European Alpha and Ignis Argonaut European Absolute Return funds. In July this year, Norris was quoted as saying that he thought Europe to be the best-placed equity market and that it offered ‘the buying opportunity of a generation’. Strong words, but do we listen? Well, with Norris I’d say yes, because he has proven himself an excellent manager of European equities through good times and bad.

To be fair, I ignored him in July. But now he’s at it again. On 3 September he was quoted once more as saying that European stock markets could rise by another 25 per cent before the end of the year.

‘Markets still have to go up another 25 per cent to get back to the levels before Lehman Brothers’ collapse. Most credit markets have recovered to pre-Lehman levels and it’s logical that equity markets will do likewise,’ he argues. He makes the point that equities in Europe are back to where they were in 1998, but this time with ultra-low interest rates. ‘It’s time to buy risk when no-one else wants it,’ he says.

That’s all well and good, but we don’t all want to take on risk. Which is why I prefer his Absolute Return fund rather than his Alpha fund at the moment. With the latter, he is buying stocks that he thinks will go up. If and he’s wrong, and they don’t, you lose money. With the former, he is able to short stocks that he thinks will go down, making money if they fall in value. Within the same fund he will still hold stocks that he thinks are going to rise. So you have a bit of protection in the event that markets are not quite as rosy as he suggests.

His Absolute Return fund will underperform in a bull market. Over three months to the end of August it had risen 13 per cent in comparison to the Alpha fund, which had risen 19 per cent in the same period. Now I’m not a greedy man, and that kind of trade-off is perfectly acceptable as far as I’m concerned. Norris may well be right about the potential of markets from here, but I’m happier to hedge my bets for the moment. The Argonaut European Absolute Return Fund is a good way of doing just that.

You can contact Andrew Merricks on 01273 204999 or via email at andrew@skerritts.co.uk.