Eurozone managers rocked by crisis, says S&P
The Europe ex UK sector is the only equity sector to have produced a negative return for investors this year and the average fund manager has substantially underperformed the European indices, according to Standard & Poor’s (S&P).
The average fund in the sector is down 4.5% year to date. The next weakest equity sector is North America, which is up 2.2% over the same period. Only 15 out of 107 funds in the Europe ex UK sector have beaten the return on the FTSE Eurofirst index over the same period (0.6%).
“Most managers are simply battening down the hatches and allowing cash to accumulate”
Part of this is a function of the weakening of the Euro against sterling, though this trend has reversed over the last month. Peter Fuller, director of European research at S&P, says that it is also because so many managers were positioned in large-cap, defensive stocks. He adds: “When managers realised that the cyclical surge had run its course, they assumed the next move would be into higher quality, good growth stocks as markets moved back to fundamentals. But this did not happen.”
Fuller says that recent volatility has seen all risk assets sold off regardless of their ‘defensive’ qualities. He adds that there have been no ‘safe’ areas: “Most managers are simply battening down the hatches and allowing cash to accumulate. There is a general trend for managers to move up the capitalisation scale, but it is not as profound as would be expected.” (article continues below)
However, Marcus Brookes, head of multi-manager at Cazenove Capital Management, has recently reduced a significant underweight position in Europe. He says: “The sector is still a relatively fertile hunting ground in terms of manager. There are lots of things a skilled manager can do to add performance in Europe—from country to sector to the currency decision.”
The strongest funds over three and five years have been those who successfully rotated between defensive and cyclical stocks in 2008/2009. These were the BlackRock European Dynamic, Jupiter European, Cazenove European, Schroder European and Ignis Argonaut European Alpha.
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