Cazenove’s McDonald stops shorting euro
Manager ramps up European weighting in the belief he has identified a “fantastic” long-term entry point.
Cazenove Capital Management multi-manager Robin McDonald has doubled his European equity exposure and stopped shorting the euro.
In a bullish move, the manager has ploughed 4.5 per cent of his flagship £808.2m Multi-Manager Diversity fund into Europe.
The manager has also ended a long-term strategy of using derivatives to short the euro. “Staying short the single currency remains potentially dangerous and at least volatile,” he said.
Mr McDonald’s exposure to Europe consists of just one investment, Chris Rice’s newly launched Cazenove European Income fund.
The manager said the move came as last month’s European equity market chaos, as the eurozone sovereign debt crisis continued to strike fear into equity markets, represented a “fantastic entry point for anyone with a decent time horizon”.
“The same cannot be said of US treasuries and German bunds,” he said.
The manager said he was not quite “banging the drum” for European equities, as the crisis is not over.
He described the European equity weighting doubling as “quietly orientating” the portfolio towards a value opportunity, with European equity markets trading at just seven times their firms’ earnings.
“Of course, Europe might go to five times earnings, but the continent is already trading at levels which have proven to be good entry points and some markets are below March 2009 levels,” he said.
Mr McDonald said he selected Mr Rice’s European Income fund as it targets “beaten up domestic plays” as opposed to global growth themes.
“People we speak to are pretty lowly weighted in European equities, and where they do have exposure it is towards safe, growth-type companies which are correlated to the S&P [500 index of US stocks],” he said.
“If you want that though I would buy the S&P rather than buying expensive shares in Europe.”
Previously, the Diversity fund had a 2 per cent European weighting that consisted of two funds, Mr Rice’s £793.1m European fund and Rob Burnett’s £920.5m Neptune European Opportunities fund.
But those funds have now been sold in favour of Mr Rice’s new Income fund, which was launched in May.
The Cazenove Diversity fund has been managed by Mr McDonald and co-manager Marcus Brookes since October 2007.
Since then it has delivered a top-quartile return of 17 per cent, compared with an average gain from funds in its IMA Mixed Investment 20-60 per cent Shares sector of 5.2 per cent, according to FE Analytics.
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