European fund managers are overweight France, Germany and the Netherlands
Fund managers have been focusing their European portfolios on France, Germany and the Netherlands markets, according to latest research by Forsyth Partners.
Overweight positions in France include the Lazard European Fund, Aberdeen International European Growth Fund and Henderson Horizon European Fund. However, all these portfolios use either a sector or stockpicking approach to choosing equities rather than a geographical one.
Charles Wilson, head of retail sales at Lazards, said: 'All sector and country weightings are a function of stockpicking. We invest client capital where we find financial productive companies trading at attractive valuations.'
Lazards uses a quantitative approach to choosing companies with a bottom-up approach. This includes price to earnings metrics, fundamental analysis and accounting valuations. Wilson says they are also allowed to deviate 5% from the benchmark index on any stock. This allows Lazards to increase its holdings in any stock by 5% from the benchmark index.
'France is the most attractive because companies there have good valuations,' he added.
John Botham, director of European equities at Hendersons, looks at his portfolio primarily on a sector basis. Although overweight positions include France and Netherlands, he does not decide on a country when picking stocks, but on a sector and then chooses the best stocks within these. Henderson uses top down and bottom-up approaches to stockpicking.
Top down areas Henderson looks at include the global macro environment, interest rates, currencies, bond yields, economic growth and oil prices. In its bottom up approach the group analyses valuations, company prospects, outlook earnings, quality of management and financial risk.
Botham is presently overweight in cyclicals, industrial and consumer sectors as he believes these stocks will benefit from a market recovery.
He favours industrial materials, building materials, chemicals and auto equities. Companies recommended include St Gobain, because of low valuations and good earnings, and Fiat, because of its recovery in the agricultural machinery markets.
Botham is underweight in financials because performance of these companies is negatively correlated and recovery is less likely to impact them positively.
Similarly, Adrian Fowler, head of European equities at Aberdeen, drives his portfolio on a sector basis.
Aberdeen is also overweight France and the Netherlands. Fowler said: 'This is because of quality management and superior companies to Germany and Italy. French and Dutch companies are shareholder friendly and have more experience internationally.'
Aberdeen favours the consumer cyclical, leisure, media and support services. However, Fowler is negative regarding defensive sectors, such as food, healthcare and financials. www.ifaonline.co.uk
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