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Eurozone crisis is ‘tip of the iceberg’

Octopus Investments’ Thierry Serero has warned the eurozone debt crisis is the tip of the iceberg in terms of austerity measures facing global markets.

Speaking ahead of the launch of his European absolute return fund on June 1, Serero said recent events are the beginning of a long-term trend that will stay with the Western world.

He says: “Not just southern Europe but the whole of Europe, the UK and the US will have to go through the same austerity measures in the next few months until fiscal discipline is brought back to all those economies.

“The result is that equity markets will be fairly capped on the upside because it will weigh on growth from Government spending and private spending.”

Serero says current volatility provides an ideal backdrop for the fund but stresses it will focus on stock-specific ideas with a special situations bias.

The fund will launch broadly market-neutral, targeting 12-15 per cent a year and a volatility of 10-12 per cent.

Serero says: “The shorts are not there to hedge market risk but to generate alpha in the same way as the long side of the book, so in general there is a good balance of both.”

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