Old Mutual builds up Euro banks

Old Mutual corporate bond manager Christine Johnson has added 6 per cent into European banks in the £550m Old Mutual corporate bond fund.

Johnson has increased the fund’s underweight position from 13 per cent to a neutral 19 per cent holding, which includes French banks.

Four per cent of the exposure is made up of derivatives and the remaining 2 per cent is in cash bonds.

Johnson says: “Last year, I was worried about the sovereign downgrade of France and when it happened it did not make a big impact on the market, so the European crisis looks better but it is not resolved, so we want to be able to switch that risk off if we need to.”

She says she is more reassured about the recapitalisation of European banks in comparison with earlier last year, as a result of the European Central Bank’s longer-term refinancing operations.

In December, the ECB said it will lend eurozone banks money for three years to keep credit flowing during the sovereign debt crisis.

Alliance Trust head of global equities Ilario Di Bon also acted on the ECB announcement. He added 3.5 per cent in European banks to the Alliance Trust global equity fund, which launched in December.