Investec Wealth & Investment has made its third increase to European equities in nine months, adding 1 percentage point to its exposure.
The latest shift of assets means IW&I now has 7 per cent of its medium risk/ balanced mandate discretionary client portfolios invested in European equities.
The move was made in the belief that structural improvements in Europe are under-appreciated and that systemic risk has materially declined.
With European equities lagging other areas, IW&I sees this as a buy opportunity.
Recently, figures showed a 0.3 per cent growth in GDP for the euro area – therefore meaning the eurozone has exited the longest recession in its history.
IW&I chief investment officer Chris Hills says: “It will take a long time to convince many people that the spectre of catastrophic systemic failure in Europe is fully banished.
”This, together with the low valuation of risk assets relative to ‘insurance’ assets such as sovereign bonds creates an investment opportunity of both significant magnitude and duration.
“It is interesting to note that Europe has the best risk reward ratio in developed markets. On measures of normalised earnings, Europe is the least expensive equity market globally. We have focused our attention on where Europe will be in 18 months’ time.”
To satisfy this most recent asset move, IW&I reduced exposure to investment grade corporate bonds by a corresponding 1 per cent – continuing the firm’s underweight stance on fixed income.
Schroders multi-manager Robin McDonald recently suggested three European funds that could be suitable for investors looking to put a more aggressive tilt to their portfolios.