I’m bullish for the first time in three years, says de Blonay
The Jupiter manager says quantitative easing programmes and the ECB’s long term refinancing operation will prove to be genuine game-changers.
By Joshua Ausden, News Editor, FE Trustnet
Thursday October 25, 2012
Investors cannot afford to be out of the markets at their current levels, according to FE Alpha Manager Guy de Blonay
While de Blonay took part in the 2009 rebound during his time at New Star, he has not been this confident about his Jupiter Financial Opportunities
portfolio since before the credit crunch, and has upped his risk exposure as a result.
"Quantitative easing has injected a huge amount of liquidity into the markets, which can’t be ignored," he said. "Inflation is on the verge of going up, interest rates are low and free markets are no longer functioning properly in that both companies and governments aren’t allowed to go bust."
"In this environment, you’ve got to be in the markets."
De Blonay was defensively positioned in 2010 and although he reduced his exposure to cash in 2011, he was overweight high-yielding defensives and the US.
He and co-manager Robert Mumby now have nothing invested in cash and have significantly increased their exposure to Europe.
"Since the fourth quarter last year, my long-term view has been that this environment will endure for a very long time to come," he said.
"The LTRO was a turning point, as it guarantees cheap funding from the ECB for a minimum of three years. We then had the confirmation of QE this summer from the US and Europe, which provided further support."
"We were already fully invested in 2011, but now we have migrated from being defensive to a more aggressive focus."
"We started investing in Europe at the end of 2011. Barclays was the first special situation we bought, which he first added on the day of the Libor scandal, and then we bought into Standard Chartered following the bribery scandal."
De Blonay (pictured)
believes Barclays is "dramatically undervalued" and that the market has completely underestimated the company’s earnings power.
"It’s trading on a 50 per cent discount to book value, has earnings power in emerging markets, and is benefiting from a recovery in the US."
The manager has increased his exposure to higher-risk special situations stocks from 10 per cent to 25 per cent since the beginning of the year, and cut back on more defensive high-yielding companies.
He says even the most bearish outlook for banks is still a lot more positive than for the majority of asset classes – particularly in the bond market.
"I’ve heard some refer to banks as 'the new utilities'," he commented. "But even using this bearish argument, you’d be buying a utility stock that’s trading on five-times earnings."
"Things in the eurozone look a lot more positive. We saw Italian yields drop from 6 to 4.5 per cent without [Mario] Draghi printing any money at all."
"I feel more confident now than I have been at any stage in the last three years."
De Blonay’s defensive positioning in 2010 and full participation in last summer’s sell-off have dragged down performance.
According to FE data, the portfolio is down 23.32 per cent over three years – significantly more than its benchmark – although performance has picked up slightly in the last six months or so.
Performance of manager vs peer group over 10-yrs
Source: FE Analytics
The manager has a stellar track record over the longer-term, however, with returns of 137 per cent over 10 years compared with 47.42 per cent from his peer group composite.
The fund’s underperformance and the stagnation of the banking sector have resulted in mass outflows in recent years; according to FE data, assets under management (AUM) have shrunk from £1.3bn in January 2010 to £465m.
Jupiter Financial Opps has a minimum investment of £500 and a total expense ratio (TER) of 1.76 per cent.
De Blonay took over as lead manager from fellow Alpha Manager Philip Gibbs
in January 2011.