Rlam’s Wilkinson ups financials

Mr Wilkinson, formerly of Hermes Fund Managers, took over the fund on January 3 from Kevin Lilley, who left to join Old Mutual Asset Managers.

He immediately reduced the fund’s financials underweight, following the rallies seen in the sector as the European Central Bank’s (ECB) €489bn long-term refinancing package for eurozone banks continued to boost sentiment.

Late last month European markets had rallied by 20 per cent from their lows in September 22 last year - as eurozone sovereign debt crisis fears damaged sentiment - with the rallies driven by the ECB refinancing efforts.

“I’m more optimistic than I was when I went on gardening leave,” said Mr Wilkinson. “The broader global macroeconomic environment is more positive than it was.”

Mr Wilkinson said he initially benefited from the defensive position he inherited in the portfolio at the end of 2011, but has now cut the underweight position in financials and now sat “close to neutral” in the sector.

He said French banks such as BNP Paribas were particularly well-positioned to benefit from ECB financing and that funding risks to the bank were “significantly reduced”.

The manager said he had adopted small weightings in French, Spanish and Italian banks because last month’s “strong rally in financials” showed managers sitting outside the sector could “get left out quite badly”.

He added that while there were still more policy measures that needed to be taken to shore up confidence in core Europe, there was “some indication that the Irish economy is past its trough”.

“I am steadily moving from defensive to more balanced but not too aggressively focused on growth,” he said.

The manager warned there were “plenty of potholes ahead” in Europe as Italian bond auctions in March and April, alongside elections in France could “provide another test for markets”.

“Greece is rightly at the forefront, but there are other imbalances that need to be reversed and painful adjustments that still need to be made,” he said. “There are a lot of activities left to be taken by politicians rather than economists that in the longer term will give investors more confidence.”

Mr Wilkinson took over management of the fund last month, after manager Kevin Lilley departed for Old Mutual in September. Rlam’s Andrea Williams, manager of the £372m European Income fund, ran the fund in the interim.

The fund has delivered top-quartile returns over the three and five years, returning 17.4 per cent over the five year term to January 20, compared with an IMA Europe excluding UK sector average loss of 0.9 per cent, according to Morningstar.