Outsized returns from peripheral European markets have led JPMorgan Asset Management’s Tony Lanning to slim down his exposure to that part of the Continent.
Mr Lanning, who runs the group’s Fusion multi-manager range, said he had benefited from exposure to countries such as Spain and Italy through passive and active holdings, but had now rotated this to the German stockmarket.
The MSCI Spain, Greece and Italy indices have all delivered more than 20 per cent in the past year, but all are now flat or have fallen in the past three months, according to data from FE Analytics.
The German stockmarket, the Dax, is up in the past year, but fell 3.2 per cent from July 7 to July 22, according to data from Bloomberg, providing an opportunity for Mr Lanning to increase exposure.
“Even though I think the periphery is in a better place than it was, it is hard to think it can continue to recover without the rest of Europe,” he said.
“I look at the valuations in Spain and it has done incredibly well so I have decided to take some money away at the margin because of the strong performance.”
Mr Lanning said the peripheral European markets were now in a position where corporate earnings had to come through to justify the re-rating the stockmarkets have seen.
“In general I still favour active managers because I think some companies will not deliver the earnings to support the performance they have already given investors,” Mr Lanning added.
The manager said he had trimmed exposure to a passive fund which tracks the MSCI Europe index, as well as some of his active European managers who run higher beta portfolios, and used the proceeds to buy a tracker fund that follows the Dax.
“This position will benefit from the good quality export companies which feature in the Dax,” he said. “These should do well as emerging markets pick up from here.”
Mr Lanning said he had also added a Stoxx 600 Basic Resources tracker fund to his portfolio in a bid to gain exposure to pan-European large-cap mining companies, which he claimed had been “laggards” of late.
“Last year risk did well, but there were some stocks which didn’t, and mining was one of those areas,” he said.
“It took a while to start working, but I have conviction in the thesis behind the purchase and it is starting to work very well now.
“The companies are on attractive valuations and still generate lots of free cash flow.”
Elsewhere, Mr Lanning said his highest conviction position continued to be Japan, and said when the market fell in the first quarter he used it as an opportunity to increase exposure.
The manager said a key Japanese holding was the Polar Capital Japan fund, which he said had a small- and mid-cap tilt. The fund rose nearly 70 per cent in 2013 in yen terms, but has lost nearly 8 per cent so far in 2014, according to FE Analytics.
However, Mr Lanning said he had been building up his position in this fund and it had once again started to perform strongly.