Three of Europe’s best fund managers bet on market recovery

Three of Europe’s best fund managers bet on market recovery

By Philip Haddon | 12:24:31 | 03 April 2009

With markets rallying in recent weeks and G20 leaders agreeing to a $1 trillion package for the global economy, three of Europe’s leading fund managers, François MoutéEdouard Carmignac andChristian Cambier, already think stockmarkets are at a turning point.

The S&P has rallied 22% in the last three weeks, and all three veterans were positioned to take advantage of this market upturn. Since November Mouté has reduced the hedging on his portfolios from 20% to just 4%, while Carmignac has dramatically lifted the equity exposure of his flagship Patrimoine fund from 2.2% at the beginning of March to 30% today. Meanwhile Cambier thinks investors will not accept fund managers missing the market rally.

‘All my competitiors are full of cash. If the market keeps on moving they will have to do something. Their clients will say “we went down 50% with you and now the market is going up and you are in cash”! They will not accept this,’ he says.

In this context, both Mouté and Prigest’s Cambier think the G20 meeting will help, but that the market had turned before it took place.

‘I don’t think the G20 was the turning point, the market is not really reacting to this, it was reacting before. All this G20 is a lot of cinema, but it was better than usual,’ Cambier said. ‘The key point is confidence. It looks like they want to bring back confidence in the system. The financial crisis is behind us – now we have to get the economy to recover.

‘In the last three weeks markets are up 25%. I think we will have two to three difficult weeks and a new start in June. The CAC will go to 3400 before July and 4200 by the end of the year,’ Cambier (pictured below) said, with the French CAC index currently just below the 3000 mark. ‘Markets have started to go up just because it is all over-done. The prices are ridiculous. Every company I look at, the price is crazy.’

Christian Chambier

Both Mouté and Cambier think the presence of leaders from emerging market economies like China and Brazil was the key aspect of the G20.

Neuflize’s Mouté believes the G20 did in fact mark a a turning point. ‘If only by virtue of the fact it is a G20 and not a G4 or G5,’ he said. ‘It shows the shift in power away from the western world into Asia and emerging countries. There is no question that China was as visible as the US there. In that respect it is a turning point.’

Cambier concurs: ‘It was important to have the people from Asia there. I have information from Asia today that things are picking up – especially for Japanese companies in China. China is the key man in  this game, that is why they were there getting close to (Brazilian president) Lula and to India. They want to buy copper and other resources for the restart of their economy.’

Although Carmignac, one of Europe’s best performing fund managers throughout the financial crisis, has dramatically increased his exposure to equities in recent weeks, he is prepared to slash it again should the market recovery turn out to be nothing but a bear market rally. His latest fund report says:

‘This rebound…is perhaps the sign that the worst of the economic deterioration, in term of rhythm, is perhaps behind us. But we are still in recession and it is far too early to expect a real up turn. Consequently, this market re-exposure was for us a tactical position that we managed via futures, and that explains why we did not for the moment raised our investment rate. It is part of our strategy to be able to take part in these bear markets rallies, as the crisis also creates opportunities. But we are ready to lower very quickly our exposure rate in the coming weeks, if this market rebound does not last.’

Similarly, Mouté is ready to reinstate his index shorts if things turn awry again.

‘We were positioned for a better environment in 2009 and things are developing painfully, but as we expected. It is not a straight line. The only question mark will be later this year if the stockmarket is inline with a stabilising economy. If there is disconnect we will have to put our shorts back on,’ he says.

Cambier, Mouté and Carmignac are all riding high in the fund manager rankings for the French, US and global equity sectors respectively (see rankingsherehere and here). Indeed, Mouté and Carmignacare both top of their sectors over five years andCambier is second in his. Cambier is A-rated by Citywire for his risk adjusted performance, Mouté is AA-rated and Carmignac is AAA-rated.

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