Both hedge and traditional long-only European fund managers are receiving conflicting signals about ...
Both hedge and traditional long-only European fund managers are receiving conflicting signals about their markets and are consequently feeling cautious, according to the latest issue of Global Fund Analysis (GFA).
Claire Makin, editor of GFA, said: "Europe's markets are posing a problem for investors. At the macro level a lot of uncertainty exists. The political background is murky Europe lacks leadership and the economic picture remains unclear.
"Long-term bond yields are creeping up and the euro's weakness has deterred overseas investors. Germany, once Europe's engine of growth, has been one of its weakest economies.
"Instead all the action is at the micro level. The dynamics of restructuring and consolidation, especially in financial services and telecoms, have been creating plenty of opportunities.
Philip Hands, co-manager of European hedge fund Park Place International, said: "We are a bit cautious at the moment and will likely reduce the net market exposure over the coming weeks to around 60%. However, we are still positive on Europe and believe there is a lot of opportunity there.
"We are looking for special situations and believe there are great opportunities to be had through restructuring, such as our investments in Eurotunnel and Telecom Italia.
Michael Nicol, fund manager of the Scottish Value Portfolio fund-European Growth fund, said: "We like companies that we believe are going to grow by innovation and product development, and can keep their prices stable and increasing. Nokia, the mobile handset company, is a good example of this. We also like banks that can increase their customer base and cross-sell products.
Makin notes that traditional cyclical stocks, most of which had previously severely lagged growth stocks, had an extremely strong start to the year while the growth stocks barely moved
Paul Marshall, fund manager of the hedge fund Eureka Fund, said: "We had a big position in cyclicals in April, however, we closed it out in May. "Holding onto it would have been a systemic bet and we do not make such bets. Also, cyclical stocks are no longer so compellingly cheap.
"Some people predict that we will see a synchronised global economic upswing but we would not build our portfolio on that prediction. There are so many other opportunities to be had out there with old companies dying and new ones emerging.
Makin said: "The question now is whether the surge in cyclicals signifies a real and long-term recovery in these stocks. If so, it will mean a major rethink of investment style for many managers who have built their careers on picking growth stocks.
£92bn transferred since 2015
Achievements, charity work and other happy snippets
Since first announcement