September 9, 2011 / 10:26 AM / 6 years ago

Equity fund slump spreads to Germany in August

* Seven of 10 worst performers Europe or UK-focused in August

* German funds 3 of 10

* Gold, precious metal equity funds buck the trend

By Thomas Reggiori Wilkes and Christopher Vellacott

LONDON, Sept 9 (Reuters) - A sharp sell-off in European equities last month extended to funds invested in Germany, the continent's economic powerhouse and often seen as a relative safe haven, with German funds propping up the bottom of the table, Lipper data showed.

Worries Germany may have to pick up the tab for the euro zone debt crisis, alongside selling of the country's many cyclical stocks, meant three of the 10 worst-performers were German funds, according to the data, which tracks 3,000-plus equity funds registered for sale in Britain.

Jyske Invest's German Equities fund fell 19.66 percent, while the MainFirst -- Germany Fund dropped 18.85 and Fidelity Funds -- Germany lost 18.22 percent.

Reflecting the broad nature of the slump in European stock markets in August, the two worst performers were the RBC Global Continental Europe fund, down 22.40 percent, and GLG's UK Select Equity Fund, narrowly ahead with a 22.23 percent drop.

"Car companies, chemical companies and finance. That is basically the German market and if you look at the sector returns they will be the worst sectors in August. So, the market is hurting a bit because of that," Per Kongsgaard, manager of the Jyske Invest fund, told Reuters.

"If there is continued trouble in southern Europe, eventually the bill will go to Germany... and (it) will have to make cutbacks," Kongsgaard said.

The DAX FDXc1 has dropped around 24 percent in 2011, in line with a 25 percent drop in the pan-European Euro STOXX 50 STXEc1.

While funds invested in southern Europe have been hit hard for much of 2011 as the region grapples with a debt crisis, public spending cuts and anaemic growth, some European managers had hoped their portfolios would benefit from exposure to the perceived safety of northern Europe.

German exporters who sell to Asia are often viewed as companies with less to lose from Europe's debt crisis.

Oliver Maslowski, portfolio manager for the Julius Baer EF German Value Fund, which fell 16.11 percent in August, said the sell-off in German stocks was overdone and company earnings revisions had so far been small.

"People drew the conclusion that this situation looks exactly like 2008 ... We are pricing in a recession scenario but up until now most of the companies I talk to do not see such a scenario," he said, adding no investors redeemed money from his funds in August.

"If you believe in the Asian growth story but do not want direct exposure to the Asian markets you should buy Germany because you are buying Asia with a discount."

GOLD FUNDS BOUNCE BACK

In a tough month for most equity fund sectors, those focused on precious metal companies stood out as strong performers as an investor flight to safety sent the gold price to a record high.

Nine of the 10 best-performing funds in August invested in gold and precious metal equities, according to the Lipper data.

The RBS Market Access NYSE Arca Gold BUGS Index Fund was the biggest gainer, putting on 9.90 percent, while the Investec GSF Global Gold fund rose 7.60 percent and BlackRock's World Gold Fund, run by star manager Evy Hambro, grew 7.42 percent. (Reporting by Tommy Wilkes and Chris Vellacott; Editing by Dan Lalor)

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