Eclectica fund manager Hugh Hendry openly admits he "cannot stand" European equities in the current market climate.
His revelation comes as a surprise as Hendry runs the firm’s £47.6m Continental European fund.
But before advisers make a quick European exodus, Hendry believes investors can still find results if they have faith in managers with a proven track record in bear markets.
Hendry’s offering is the top performing fund in the IMA Europe ex UK sector over the year to 14 March 2008, outperforming the index by almost 14%.
While his track record in the current climate speaks for itself, Hendry feels his performance running a similar fund at Odey during the 2001-02 bear market can further reassure investors.
“At that time the stockmarket was down 20% and our fund was the only one to make money, up 3%,” he says. “As a period of time we can definitely see some parallels now.”
Hendry says the reason for his current solid performance is in simple stock selection.
“This is a tough environment, fewer and fewer stocks are beating the benchmark,” he says.
“No rational person would invest in European equities looking at the index, but the difference is most funds bow to benchmark risk, many feel they need to have stocks even if they don't like them.
“Our fund has held no financials for two years, but we have a high weighting in agricultural stocks, which make up a fraction of the index. It’s all about conviction and emotional intelligence.”
Hendry has also called on European Central Bank (ECB) members to resign, saying the bank’s decision to hold rates on inflation fears is “bonkers”.
“Inflation is when all prices rise, not just food and energy. The Federal Reserve has realised this and has cut rates to bring some stability,” he says.
“The ECB is determined to make us all bankrupt. There is immense strain on the system, this is the closest we have come to 1929."
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