Veteran investor Richard Pease has adjusted his blockbuster European equity fund to limit the knock-on effects of Chinese volatility, the Citywire + rated manager has revealed.
In the £1.02 billion (€1.44 billion) fund, which was launched in 2009 as the Henderson European Special Situations fund but renamed in June, Pease said he was dealing with ‘sentiment turning sour’ on China and its related stocks.
‘Fears about a Chinese slowdown are likely to cause continued volatility in equity markets (for example, BMW saw a decline in Chinese sales in May). Valuations of European companies with exposure to the region have de-rated,’ he said.
While Pease said he was conscious of some companies being over-sold and presenting investment opportunities, but was also mindful of existing European holdings being adversely affected by the current situation.
‘For example, we disposed of our remaining position in Kone, as most of its growth comes from Chinese construction which looks likely to slow down,’ he said.
Elsewhere, Pease has taken profits in chemicals company Croda, which he believes is now overvalued. He has bought back into construction group Sika, while also opening a new positions in Swedish group Swedbank.
‘It is a well-capitalised Swedish bank paying nearly 6% dividend yield,’ he said. Sweden as a region is the third largest country bet at 14.15, which is behind Switzerland (14.6%) and Germany (18.6%).
The Henderson European Special Situations returned 90.72% in euro terms over the three years to the end of May 2015 – the latest available date before the formal switch to the Crux AM branding.
Its Citywire-assigned benchmark, the FTSE World Europe ex UK TR EUR, rose 90.27% over the same timeframe.