Octopus' Wallin poised to pounce on Europe

Octopus' Wallin poised to pounce on Europe
European equities lag US and world markets

Octopus multi-manager Oliver Wallin is preparing to pour money into Europe, predicting an attractive entry point within the next few months as pressure starts to mount on other equity markets.

Although the Octopus multi-manager team currently has neutral allocations to the region, investment director Mr Wallin said it was actively looking to add to positions. 

He said there should be a more attractive entry point in the continent in the coming months, where political concerns could depress prices.

“We are interested in Europe, which has more potential [than other regions], but we might wait before we move,” the manager said.

He acknowledged political risks in Europe – due to elections in France, Germany and potentially Italy – could affect valuations, but said political fears were “overblown” and the team was waiting for markets to get spooked, creating buying opportunities.

“We are at a neutral [weighting] on Europe because we think we can add in at a better value in the coming months,” he said.

European stockmarkets have risen strongly in the past year, with the MSCI Europe ex UK index up 16.8 per cent in base currency terms, data from FE Analytics shows. But European equities have lagged other major markets, such as the US. The MSCI World index has gained 17.6 per cent.

Yet there are signs the eurozone economic situation is brightening after many years of sluggish growth, with leading economic indicators showing it returning to the area.

In spite of his ambition to add to Europe, Mr Wallin said one of the major changes across Octopus’ multi-manager portfolios in recent months was the selling out of the Verrazzano Advantage European fund.

He said the fund, managed by Guillaume Rambourg, had occupied a spot within Octopus’ portfolios for a long time, but had been sold down last year following the Brexit vote in the UK.

“The sterling hedged share class had been great for us over the years but looking at the performance of sterling we concluded that it was no longer required,” Mr Wallin said.

Other recent changes to the suite of Octopus multi-manager products have included building up a position in Ed Legget’s £545m Artemis UK Select fund. 

Mr Wallin said Octopus had invested with Mr Legget when he managed the Standard Life Investments UK Equity Unconstrained strategy.

Mr Legget took over management of the Artemis UK Select vehicle at the start of 2016, but Mr Wallin said his team had waited to invest with him again until he had “bedded down at the new firm”.

A further change has been a build-up in the exposure across Octopus’ portfolios to the £9bn Invesco Perpetual Global Targeted Returns fund, managed by David Jubb, David Millar and Richard Batty.

The Invesco offering has become Octopus’s go-to fund for investing in global macro ideas, replacing Standard Life Investments’ £25bn Global Absolute Return Strategies vehicle, from which the Invesco team was poached.