Guy de Blonay has turned over 20% of the £900m Jupiter Financial Opportunities fund, selling out of major Chinese banks and buying into US financials.
Since officially taking on lead management of the £897m fund from Philip Gibbs on 1 January this year, de Blonay has made significant changes to the portfolio's top ten holdings, and has overhauled its geographical allocation.
The largest regional weighting is now Europe, at 35% of the fund, while just 6% is in the Far East. This is a complete reversal from the end of November last year when Asian markets comprised almost 40% of the portfolio and the US was just 4%.
De Blonay has sold all his holdings in Chinese banks, including Bank of China, Industrial & Commercial Bank of China, and China Construction Bank, and bought into US stocks including high street bank Wells Fargo, and investment banks Goldman Sachs and JPMorgan Chase.
"We have reduced the Far East, particularly China, and replaced them with the HSBCs and J.P. Morgans of this world," de Blonay says. "We wanted to reduce the emerging market presence because we wanted to reallocate to developed markets in low inflation environments, and the US was very much one recovering, with low inflation.
"Chinese banks were about 20% of the fund and that has gone directly into Americans stocks like JPM, Citigroup, Wells Fargo and Goldmans."
Standard Chartered was formerly the largest holding in the fund, but de Blonay has taken this position down to 2%. "There is a struggle to contain growth in emerging markets, and Standard Chartered has 90% of its revenues from these markets, and we realised costs were going up," he says.
De Blonay has also increased exposure to Continental Europe, including Switzerland, Sweden, and Norway, but is avoiding the troubled Southern European markets.
"These are economies with very low deficits, where jobs are being created, and where lending has kick-started again," the manager says.
De Blonay also holds UK high street banks Barclays, Lloyds, and HSBC as small positions in the fund. Ahead of Lloyds' and HSBC's annual results, he expects the groups may surprise on the upside.
"Lloyds and HSBC are cheap stocks, and they may surprise, like Barclays did. Some decent results should move the stocks higher as they have been discounting quite a lot of bad news already.
"The only one that may disappoint is HSBC. We increased our holding in HSBC, which is now 7% of the fund, because we believe it is not just about the Far East but also the US recovery. It is a global franchise, and it is not an expensive stock."
Meanwhile, De Blonay believes financials could rerate as much as 20% over the next 12 months, and will drive the next leg of the bull market.
"Financial stocks are the engine of economic growth. Without financials it is very difficult to see the second leg of this bull market happening.
"Financials are attractive on a valuation basis, they have all been priced for default in the eurozone and elsewhere in the world. We just need a bit of political will to reassure the markets and show economies are improving so credit gets better and lending filters through," he says.
"Return on equity is underestimated by the market generally and that surprise of superior return of equity will re-rate financials from where they stand today.
"All things being equal, assuming containment of the eurozone and other indebted economies, financials may re-rate 20% over the next 12 months."
Championing diversity in the workplace
Our weekly heads-up for advisers