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De Blonay cutting euro exposure on financial opps fund

Jupiter fund manager Guy de Blonay is planning to lower the European exposure of the £1.4bn financial opportunities fund after highlighting the eurozone as the biggest concern to the continuing economic recovery.

De Blonay
De Blonay: Hope for UK recovery

De Blonay, who will co-manage the financial opportunities fund with Philip Gibbs from June 1, says there are better opportunities in areas such as the US and Asia.

The financials fund had a 15 per cent exposure to Europe at the end of March, an underweight for the sector.

De Blonay says fear of contagion and the possibility of a number of austerity packages may see low growth in Europe for a long period of time.

“We are not saying there is no opportunity for investment for Europe, what we are saying is there is better elsewhere. There is a recovery in the likes of the US, Asia and Australia, so why deal with cheap markets that need to tackle strong issues?”

He says Asia has a great balance sheet in general and growth will be found in markets such as India, Indonesia and Singapore.

“We will move towards a mid-20s’ percentage weighting soon in that sector. It will be purely on the back of the eurozone as we will keep exposure to some super sovereign economies like Norway. We will also increase our US exposure, the consolidation of the likes of Bear Stearns and Lehmans has made some stronger companies and a better environment.”

De Blonay says the eurozone is only one of three issues hitting the recovery, pointing to US banking regulation and the Chinese property sector as other concerns.

“The impact of further regulation of the banking sector could actually be good news because when you look at well regulated and well supervised banks, such as in Canada, it creates a re-rating to the sector that, even though there is strong supervision, they are seen as safer, meaning higher valuations.”

De Blonay says the team is tackling the question of a China property bubble. “My gut feeling is the authorities know what they are doing and will take the measures to calm the high spirits.”

He says equities hold the most appeal for investors in the long term, pointing to the fact that both property and bonds are on a high and there is no return from holding cash.

“That should be the route, provided the market can survive those three concerns, the most pressing being Greece and whether the problems spread. The austerity packages must be strong, wages must come down and growth will have to slow in Europe. “We will enter a sluggish growth environment in a fragile Europe with the euro set to weaken.

De Blonay says hope is coming back to the UK market.

“The recovery is less V-shaped in the UK than in the US but it is a flexible economy and as long as London can keep its stature as a financial hub, it can recover.”

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