Jupiter fund manager Guy de Blonay has invested in a raft of European banking stocks across his £500m financial opportunities fund as he believes improving liquidity in markets is set to re-ignite risk appetite.
De Blonay says the fund has re-entered the likes of Italy, France and the Benelux region as he looks to raise the special situations portion of the fund above 30 per cent.
De Blonay says the fund has largely invested in growth stocks and high yielding stocks recently, but says improving liquidity has led to him adding more beta to the portfolio through these banking stocks.
The fund manager says that the market is now liquidity driven and that this is set to increase in the next few weeks.
He says: “The first long term refinancing operation has been quite successful. Italy is now able to refinance at a more comfortable level compared to the end of last year. It should result in an improvement in confidence and interbank lending. The second LTRO should sustain improvements in confidence, lending and liquidity.”
He says that special situations companies have been left aside on the back of the credit crisis and the sovereign debt crisis.
He says examples of special situations banking stocks he has invested in include Societe Generale and RBS, the latter he says is a good example of a company that is deleveraging and selling assets but is still well capitalised and at a low valuation. He has also invested in a bucket of ltalian banking stocks including Banca Intesa and Banca Monte dei Paschi Siena.
De Blonay says that although the problems in the banking sector have not been solved, the appointment of Mario Draghi by the European Central Bank has helped as has the subsequent LTRO.
He says: “It has given them time to sort themselves out without diluting shareholder value the way the market was expecting and also to get funding at a better rate. The LTRO has taken significant risk off the table and has allowed a number of companies to re-rate. It is important to recognise that the ECB will take any risks necessary to help the eurozone, even Basel III will be delayed if needed.”
De Blonay says the fund has 25 per cent in European stocks and that this push into special situations companies could see that portion of the portfolio reach 30 per cent.
He said: “The idea will be to keep the fund split three ways. A third in growth stocks through emerging markets, a third a high yielding, stable companies with little risk and offering a good dividend and a third in these special situations stocks which are turning around or have had an event that has changed their strategy.”