Henderson fund manager John Bennett tells Joanna Faith why investors should stick with European equities despite the current crisis in the region.
What’s your message to investors uncertain about allocating to European equities at the moment?
The bear market is not finished but is in the very late stages. The corollary of this is that the 30-year-old bond bull market is nearing its end. I feel the next market shift will be a size rotation from small and mid caps to large caps as well as a move from growth to value stocks. That may yet be a year or so away but it will come.
The opportunities I am seeing now are unlike anything I have ever seen in my career. I have upped my personal equity exposure from 60% to 70% and I am looking to take it to 85% to capitalise on this. Things are likely to get worse for European equities in the short term but the opportunity is coming.
How have you been playing the eurozone crisis?
Why to stick with European equities
We are not traditionally macro-focused; however, in the current environment we need a view and a response. Many super bears are now saying there are opportunities in Europe and I would agree. We have been bearish since 1999 and we are now turning bullish as this is becoming a once in a generation opportunity to buy European equities.
I cannot believe I own certain stocks and the majority are French. They have just appointed a socialist president, yet I am buying more stocks as the Americans and others are fearful of what Francois Hollande may do.
The Americans have sold more aggressively and this has opened up big opportunities for us. Stocks like Valeo and Vivendi used to make me wince but now I own them. These are former beaten-up value traps but they are now opportunities. We have engaged with small holdings currently.
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