Ask The Experts: Three Sectors This Brazil Equity Fund is Positive On
Rafael Bardella, Head of Latin America Investment Specialists at BNP Paribas Investment Partners, speaks to Fundsupermart about the Parvest Equity Brazil.
Can you briefly explain the investment strategy of the Parvest Equity Brazil fund? In particular, how much attention is paid to the benchmark with regards to sector or individual stock weightings?
- Parvest Equity Brazil fund is a long-only equity fund
- Select best investment case within the Brazilian investment universe, which includes companies which have at least half of their revenues coming from the Brazilian market
- Bottom-up investment strategy focusing on fundamental research
- Team based in Sao Paulo to conduct company research; proximity key to generating alpha
- Portfolio takes active benchmark allocations
- Overweight and underweight positions reflect team's convictions
The financial sector is the fund's largest sector allocation at 31.09% of the portfolio according to the fund's 31 January factsheet. What are the reasons for this large weight?
- Overweight in financial sector especially in Brazilian banks
- Consumption growth and credit in Brazil can be captured by these banks
- Banks are also attractively valued due to their ability to generate strong free cash flows and returns on equity
Compared with the index, the fund is underweight the utilities sector. What are the reasons for this allocation?
- Utilities sector is a defensive sector
- Difficult year for equities in 2011 caused investors to seek out defensive strategies and the utilities sector was a key beneficiary
- Hence current valuations for the utilities sector are stretched and companies in the sector are expensive
- Growth for the sector is also unattractive
Within the consumer space, the fund seems to favour the consumer staples sector rather than consumer discretionary. What are your views with regards to the consumer sectors in general, and what are the reasons for the preference for consumer staples?
- Strategy for more than a year has been to overweight the domestic consumption sectors
- Careful selection in consumer sectors as many companies are already well priced for their growth prospects
- Trend is a consequence of stock picking rather than a preference for staples over discretionary sectors
Is there an investment idea the fund is currently very positive on right now?
- Fund is very positive on telecommunications sector especially the mobile companies
- Good prospects for growing data services and mobile communication
- Also positive on home builders due to strong cash flows in 2012
- Third sector bet will be in financial sector
||02 May 2012
||Ask The Experts: Three Sectors This Brazil Equity Fund is Positive On