By Leo Bland Credit Suisse Asset Management (CSAM) is to boost its European analysts team to address...
By Leo Bland
Credit Suisse Asset Management (CSAM) is to boost its European analysts team to address the underperformance in its unit trust run by Patricia Maxwell-Arnot.
Credit Suisse European has been underperforming in the medium term and missed out on the performance of stocks such as Nokia during much of last year.
The fund also missed out on the rally of the European banking sector that began in 1997 by running an underweight position.
CSAM is to increase its team of European-based analysts from seven to as many as 17 during this year to improve research coverage of key strategic areas of the European market where the rate of change is rapid. The group already has analysts covering sectors such as telecoms, pharmaceuticals, banks, media and retail and will be recruiting for areas including technology.
Maxwell-Arnot said that she was not looking to change her risk-averse investment strategy of investing in blue-chip, liquid stocks, which focuses on the potential for downside in stocks as well as for upside. This strategy has led to the fund missing out on opportunities in areas like the technology sector. For example, the fund did not invest in Terra Networks, the internet arm of Telefonica, which floated in November on a share price of E30.
The stock has more than tripled in price since then and is currently trading at E97. Also, the fund was buying into Nokia between late November and early December last year but missed out on much of the outperformance of the stock during 1999.
Even so, Credit Suisse European has been overweight in telecommunications since 1998 and has been investing in stocks in the sector such as Ericsson, Vivendi, Telecom Italia and Telefonica. Ericsson saw its share price rise by 223.64% in Swedish krona terms in the year to 3 February while Telefonica shares were up 119.71% and Telecom Italia shares up 121.28% in the same period in local currency terms.
Credit Suisse European is ranked 84 out of 89 funds in the Europe excluding UK sector on growth of 50.7% over three years. It is 90 out of 99 over one year on growth of 4.4% and 85 out of 102 over three months on growth of 13.2%.
Maxwell-Arnot said: "We run the fund with a combination of top-down and bottom-up analysis. We choose the markets that we want to overweight and then choose the stocks and the sectors that we favour, taking a 12- to 18-month view on markets, stocks and sectors.
"The portfolio favours telecommunications companies and within this we focus on equipment suppliers, where we think there will be an upturn in spending. We are also favouring the cyclical sectors which have been left behind and are keen on basic industries such as construction stocks.
"One area in which we have been light has been the banks There was a risk in the bond markets that yields would go upwards and we also see the internet as a threat rather than an advantage for most banks."
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