Australian investors might be licking their lips over at the surge in European equities, but a falling euro may crimp potential gains.
Since the European Central Bank began to first purchases in its quantitative easing program, European shares have surged higher, while the euro has weakened.
Overnight on Monday, Germany's DAX hit a record high and has pushed 24.1 per cent higher this year. Over the same period, the Euro stoxx 50 has gained 17.8 per cent, France's CAC has jumped 18.5 per cent, while London's FTSE 100 has risen just 3.6 per cent.
Prior to the ECB's €1.1 trillion QE program, European shares had struggled to find upwards momentum, but the prospect of more cash in the market and a slightly less gloomy outlook for the continent have buoyed investors.
"You've seen a significant revaluation of European equities. A lot of the long-term risks haven't gone away," Wingate chief investment officer Chad Padowitz said.
"But, I think the cyclical upswing in some of the economies is taking paramount importance and the structural issues are somewhat taking a backseat."
The performance of European equities is enviable, especially when compared with Australian and the United States. In 2015, the benchmark S&P/ASX200 has risen 8 per cent per cent and the S&P 500 has added just 1.1 per cent.
The problem with the ECB's QE program for Australian investors is that it devalues the euro against a basket of currencies, including the Aussie dollar.
Since speculation of European QE began in mid-December, the Australian dollar has jumped more than 10 per cent against the euro meaning that some gains on the equity market would be offset by a falling European currency.
If an Australian investor bought an iShares Europe exchange-traded fund at the beginning of 2015, they would have made 10.3 per cent. However, the index which the ETF is benchmarked against, the S&P Europe 350 has pushed 17 per cent higher.
Mr Padowitz said he expected the rise of the Australian dollar against the euro to be short-lived, however, European equities are looking a little stretched.
"I would think we're getting towards the upper ranges of where you would expect that rerating to happen," Mr Padowitz said.
"If you haven't invested now, it's not an overly attractive opportunity set. It's not negative but I don't think it's screaming opportunity the way it potentially was six or seven months ago."
Of the opposite view, Nikko Asset Management global currency and fixed interest strategist Roger Bridges reckons, negative interest rates in Europe and a QE program still offer enough for equities to move higher.
The problem is, he expects the Australian dollar to keep appreciating against the euro.
If investors were still keen to get into Europe, Mr Bridges said they should consider doing it on a currency hedged basis.
"So you're basically putting your money into euro but hedging back into Australian dollars. That is also a positive thing because of higher interest rates here, you get that interest differential," Mr Bridges said.
However, given the varying opinions on which way currencies will go, it comes with its own set of risks.
It is also quite difficult for Australian investors to gain hedged exposure to Europe. While it is possible for retail investors to gained exposure through hedged world equity exchange traded funds, BetaShares, iShares and State Street do not offer a hedged Europe equities specific exchange-traded fund.