Neptune is hoping a shift to defensive stocks will help drive the performance of its European Opportunities fund into 2008.
Manager Rob Burnett says the fund has undergone a “big transition” since Q1 this year by shifting more of the fund into large cap opportunities.
Burnett says the fund has moved away from cyclical stocks, an area it had invested heavily in previously, to stocks such as consumer staples and pharmaceuticals.
He is happy to stick with this approach despite the Neptune European Opportunities fund taking a two-week hit following the recent US rate cuts, as investors clamoured back into energy and industrials.
“Cyclicals have been fantastic for three or four years, but it is time to move on,” Burnett says.
As the tightening of credit impacts on the availability of capital for small caps, Burnett believes large caps are not under the same pressure as they offer more diversified options.
“There is no real support for small caps in Europe,” Burnett says. “It has just been decimated in the last few months.”
The fund does not have any exposure to banks and insurance companies but still owns financials not directly connected to any sub-prime related areas.
Burnett says the fund also has the facility to look at derivatives if the market outlook becomes worse.
Looking at the individual markets, Burnett is positive on the major players.
“Germany has a solid foundation and is well positioned to weather this slowdown,” he says.
“As for France, it is the most interesting economy in Europe. (President) Sarkozy is trying to boost things.
“If he can reform the labour market… it will be a huge, absolute rocket for the economy.”
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