Europe’s economy gained momentum after Emmanuel Macron won the French presidential election on Sunday. Macron’s victory over right-wing Nationalist Party candidate Marine Le Pen came as welcome news to investors as fears over a possible “Frexit” dissipated. Instead, investors are now focusing on the economic progress of France under the Macron presidency and the positive impact of this result on the Eurozone.

Banking on such positive trends, the addition of mutual funds having significant exposure to European securities could prove to be lucrative. Now, let us take a look at some of the encouraging factors that contribute to gains in European mutual funds.

Macron’s Win Ends Frexit Fears

Emmanuel Macron became the next French President on Sunday putting an end to Frexit woes which had been lingering for months. Macron easily defeated his opponent, right wing Front National candidate Marine Le Pen, by securing 66% of the vote.

Even then, the enthusiasm among market watchers was both palpable and understandable. While Macron had made it clear that he wants to keep France in the EU, Le Pen was committed to hold a referendum in which people would decide whether to leave or stay in EU, raising the specter of a ‘Frexit.’

But this departure did not have as much as an impact as anticipated. This is possibly because Britain may not have been as central to the EU project as was believed earlier. But a Frexit would certainly have had a major impact, especially because France is also a member of the Eurozone. With Macron’s victory, Frexit fears have subdued and came as a big relief for other European allies.

European Fund Register Steady Inflows in Q1

In the first quarter, European mutual funds posted best quarterly inflows of €210 billion in the last five years. This was more than double the €82 billion inflow recorded in the prior quarter. Strong investments in equity, alternative and bond funds contributed to gains in the previous quarter.

According to Thomson Reuters Lipper, European mutual funds added around €65.1 billion in March and registered inflows for the third straight month. European mutual funds have totaled €210.5 billion so far this year, as per Lipper’s data. Further, strong inflows of around $100 billion are expected in European mutual funds, following a favorable political backdrop in Europe.

Moreover, the Eurozone experienced quarterly growth of 0.5%. Such an expansion amounts to a yearly growth rate of 1.8% for the 19-country economic bloc. This is significantly better than the first-quarter growth pace of 0.7% recorded in the U.S.The Eurozone posted relatively better economic growth in the first quarter than the U.S., which makes mutual funds from this region a strong investment.

Buy These 4 European Mutual Funds

All the economic reports clearly indicate that Europe’s economy is stabilizing. Moreover, the Vanguard FTSE Europe ETF gained 11% and 7.2% over the last three months and one month, respectively.

Additionally, mutual funds related to the European equity market also registered strong returns. According to Morningstar, the region’s equity mutual funds posted three month, year-to-date (YTD) and one-year returns of 11.1%, 13.9% and 16%, respectively.

This upbeat backdrop calls for investing in four European mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have impressive three-month and year-to-date (YTD) returns. They also have minimum initial investment within $5000 and low expense ratios.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

JPMorgan Intrepid European A(VEUAX Quick QuoteVEUAX - Free Report) seeks capital appreciation for the long run. VEUAX invests a bulk of its assets in equity securities of European companies, with key focus on those which are based in Western Europe. The fund may try to manage its cash flows effectively by utilizing exchange-traded futures.

The fund has three-month and YTD returns of 10.9% and 15.2%, respectively, an expense ratio of 1.42% as compared to the category average of 1.44%. VEUAX has a Zacks Mutual Fund Rank #1.

Invesco European Small Company A (ESMAX Quick QuoteESMAX - Free Report) seeks appreciation of capital for the long run. ESMAX invests the lion’s share of its assets in equity securities of small-cap European companies. Small-cap companies are those whose market-cap is similar to companies included on the Russell 2000 Index. ESMAX mostly invests in depositary receipts and equity securities.

The fund has three-month and YTD returns of 10.2% and 15.6%, respectively, and an expense ratio of 1.40% as compared to the category average of 1.44%. ESMAX has a Zacks Mutual Fund Rank #1.

Putnam Europe Equity A  seeks growth of capital. PEUGX invests heavily in equity securities of large and mid cap European companies. PEUGX uses a “blend” strategy to invest in a company depending on factors including valuation, growth prospect and cash flows.

The fund has three-month and YTD returns of 11.2% and 14%, respectively, and an expense ratio of 1.31% as compared to the category average of 1.44%. PEUGX has a Zacks Mutual Fund Rank #2.

T. Rowe Price European Stock (PRESX Quick QuotePRESX - Free Report) seeks long-term capital appreciation. PRESX invests a major portion of its assets in companies that are located in Europe or whose operations are related to this region. PRESX generally invests in common stocks of companies irrespective of their market capitalizations.

The fund has three-month and YTD returns of 13.5% and 16.8%, respectively, and an expense ratio of 0.96% as compared to the category average of 1.44%. PRESX has a Zacks Mutual Fund Rank #2.

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