The curtain has fallen on Citywire Berlin 2013 after three days of fund manager meetings, selector discussions and top-level macroeconomic presentations.
Here Citywire Global's Matt Goodburn uncovers three of the top trends on investors’ lips at the event.
1. The UK needs to up its game on China
According to T Rowe Price’s AAA-rated European equities manager Dean Tenerelli, the UK should be doing far better in China. When compared to Germany, the UK’s exports to China are very low, at less than 10% of its total output.
Tenerelli is generally shunning UK stocks, but not only because he believes they look expensive relative to their European peers, but because they have a comparatively low exposure to emerging markets.
As Tenerelli puts it: ‘The UK has EM exposure but it is mainly to the less profitable parts from its colonial past. Its China relationship is not great and it needs to do more.
The UK has great exporting manufacturers, such as Rotork, but compare that to the German mid-caps - there are not enough of them.’
He says the UK is also missing out in the lucrative Asian tourism stakes with many Chinese shopping for luxury brands until they drop in Paris rather than London, due to the relative ease of getting visas to visit France.
Belatedly, the UK is waking up to the trade gap with plenty of trade missions to China, and initiatives to ease the visa restrictions for Chinese tourists.
2. Samsung Electronics is popular, and changing for the better
Emerging markets managers are drawn to Korea’s Samsung Electronics. Both Nordea’s Jorry Rask Noddekaer and American Century Investments’ Patricia Ribeiro have the Korean tech giant as their biggest fund positions.
Noddekaer had a 6.73% fund position in the group at the end of September and said the stock is trading at a significant discount to its consumer peers. With a strong fund focus on SRI, Noddekaer screens stocks for their corporate governance and sustainability.
Samsung has had historic issues with its workforce, but Noddekaer believes they are sincere about improving their governance, and that there is strong evidence to suggest they are determined to boost the dividend culture at the firm.
He added: ‘They are putting a lot of people on the ground in China to check on their factories. They have spent $120 billion building their brand so they don’t want to blow their reputation on a dodgy factory.’
3. The hunt for bond alternatives is hotting up
It is generally accepted that the days of bonds offering equity like returns with relatively low volatility are over but one key question in Berlin was what do you replace them with if you want to avoid equity like volatility?
Over Wednesday night’s dinner, one fund selector told Citywire that his family office portfolio remained at more than 65% in fixed income, and cash was being stockpiled as he awaited the right asset class to recycle some of that cash and bond exposure into.
Two fund managers making a strong pitch for that cash are Jupiter’s Miles Geldard and BNY Mellon’s Andrew Cawker. Geldard’s Jupiter still has 40% of his mixed asset Strategic Total Return fund in high quality but very short duration corporate bonds.
This is while he admits that in his Jupiter JGF Global Convertibles fund he should have had more equities recently, although a Japanese equity overweight has helped.
As he freely admitted however, he is a very conservative manager, looking for cash plus 3% from the fund with low volatility.
Cawker’s BNY Mellon Absolute Return fund aims to take the volatility out of equities by offering pair trades to neutralise equity market volatility. He is also targeting a cash plus 3% return with extremely low volatility. Cawker believes there is still too much beta embedded in many portfolios.
He said: ‘All asset classes are dancing to the tune of central bank intervention and if you look back at June’s volatility it shows that people still have not learned the lessons [of the global financial crisis].We think we have the answer for those who need low volatility uncorrelated returns.’