Isis fund manager believes businesses are beginning to show value after being hit by downturn
Davina Curling, manager of the Isis European and European Prime funds, is increasing her exposure to Germany after a long period of underweighting the region.
Germany was the worst-performing European country in 2002, halving in value in absolute terms, she said.
But now, on a stock selection basis, Curling has found businesses that are beginning to show some value after being hit hard during the downturn. These are companies for which she sees limited downside going forwards.
She said: 'There comes a stage when you need to close out a very negative bet as there becomes a risk of not holding a stock.'
Accordingly, Curling has moved to being just slightly underweight Germany. While she has not been buying aggressively, she has been reducing underweight positions in German banks and insurance companies.
Curling has also reduced her holding in the French internet services company Wanadoo and put the proceeds into the German equivalent T-Online. She has also bought into Siemens and Continental Holdings.
Over the 12 months to 24 February 2002, the European and European Prime funds are ranked 49 and 17 out of 105 funds in the Europe ex-UK sector respectively, returning -27.9% and -24.8% offer to bid compared to a sector average of -27.9%.
Like Curling, Richard Philbin has been making changes to his Isis multi-manager portfolios, increasing his exposure to both fixed interest and focused funds. Philbin has been building up positions in the Isis UK Prime and European Prime funds in the three fettered funds he runs: Isis Managed Growth, Isis Portfolio and FP Managed Portfolio.
To offset this risk, Philbin has also increased the funds' exposure to fixed interest through buying the Isis Extra Income Bond and Worldwide funds.
He said: 'It is all a case of moving up the risk scale, but also moving down the scale at the same time. As a group, we firmly believe active managers add value, so I have been selling down the passive side by reducing our exposure to the Isis All-Share tracker.'
Isis Managed Growth and Isis Portfolio had £7m combined in the All-Share tracker, which has been reduced to £2m and will be taken down to zero in the next few weeks. Philbin believes that using Mike Felton's skills in the equity arena is currently a better option for unitholders than holding a tracker, although he does still hold the Isis FTSE 100 tracker and intends to continue doing so.
He said: 'When the war finally ends, the money that comes into the market will be liquidity driven, so we expect FTSE 100 stocks to bounce first.'
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