L&G’s Launder ramps up market exposure

The manager is seeking to take advantage of the strong start to the year by European markets and has reduced the £98.8m fund’s underweight position in banks, but also warned of a potential pullback after a strong bull market run.

Last month the Stoxx Europe 600 index moved into bull market territory, closing at 257.8 points on January 26, marking a 20 per cent gain from its September lows. Since the start of the year Mr Launder has been selling some of his more defensive holdings in pharmaceuticals and retailers in favour of financial stocks such as BNP Paribas and Unicredit.

“We still expect markets to be up by the end of the year, but this 25 per cent run we’re on at the moment deserves to pull back at some point,” he said.

“The next big thing is Greece - perhaps we can deal with that, and if the market can move on without any big shocks then it should be fine. Any pullback will be shortlived but dramatic, but then the market will be 10 per cent cheaper.”

Mr Launder said the European Central Bank’s Long-Term Refinancing Operation had resolved many of funding difficulties for European banks, meaning that although there was still deleveraging to be done, the financial sector “could potentially cope with a Greek default”.

However, he warned that the potential for Greece to exit the euro was still central to equity market sentiment.

Mr Launder said: “A pullback in markets will be fine as long as we don’t get a separation situation in Europe. If Greece has to leave the euro then the market will panic and we will be back to last summer.”

The L&G European fund lost 12.3 per cent over five years to February 1, compared with an IMA Europe excluding UK sector average loss of 2.3 per cent, according to Morningstar.