In September, the New Star European Value Fund fell 17%* while the FTSE Europe excluding UK Total Return Index lost 13%*. The fund is based on a fundamental screening process but when fear reigns investors ignore companies' fundamental characteristics. During the month, the VIX index, a measure of volatility, breached 40, a level last reached in 2001.There have been various occasions during the last few decades when markets have fallen to extremely low levels and investors have been unable to appreciate the value on offer, value confirmed during subsequent recoveries. The reason that bargains have been shunned has typically been fear.In such circumstances, it makes sense to view things in historical perspective. Last month, for instance, the historic yield on equities was above the 10-year bond yield for the first time since 1957; the historic price/earnings ratio for the market and its historic price-to-book ratio were at 25-year lows; and a quarter of the companies quoted on the market qualified as value stocks using criteria developed by the legendary value investor, Benjamin Graham.
