Ask The Experts: Select Financial Picks In Europe Make Worthwhile Investments
Jeremy Whitley, Head of UK and European Equities at Aberdeen Asset Management, shares his views on the European equity market and explains the reasons behind the financials sector allocation of the Aberdeen European Opportunities Fund.
The fund's largest sector allocation as of its January 2012 factsheet is in the Financials sector. What are the reasons for this large weight given the negative sentiment with regards to this sector?
- Financials sector is a bit of a misnomer; it is a large sector that includes real estate companies, insurance companies, fund management companies, banks etc
- Fund currently invests in 3 banks amounting to about 10% of the portfolio, including Standard Chartered which makes very little of its money in Europe, a Spanish bank BBVA which makes 60% of its profits in Mexico and other parts of Latin America, and Nordea which is a very well-managed bank based in Sweden with strong deposit base
- Also invests in Schroder, a competitor to Aberdeen Asset Management, and insurance companies (Mapfre in Spain, Zurich Financial Services and Prudential)
What investment detracted most from performance over the last 12 months, and is the fund still holding on to this position?
- Worst performer was Mothercare which can be thought of as 2 halves -- international operations which are very strong and UK operations which have been very weak
- Changing consumer shopping habits involving using the internet for price comparisons hurt UK operations
- Still has strong balance sheet but face difficulties in UK
- Was a small position in the fund which has since been sold off
Are there any specific investment themes the fund is looking to benefit from?
- No specific themes, mainly to find strong companies in industries that have strong tail winds
- Avoiding harsh industries such as auto makers or airline companies
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