Kevin Lilley is to begin running Old Mutual Asset Managers European Equity fund next week, as the first solo manager to run the fund in seven years.
Lilley takes over the running of the £61.9m fund from the firm’s quantitative strategies team and has outlined plans to scale back the fund’s exposure to the financial sector.
Under the management of the quantitative strategies team, financials was the portfolio’s most heavily weighted sector for most of 2011, constituting an 18.6% position.
This will be reduced to an underweight position from Wednesday, although “not aggressively so”, says Lilley.
The fund’s initial focus will be on 45-50 large-cap stocks delivered by international-facing companies, essentially selecting “global companies which just happen to be domiciled in Europe”, says Lilley.
“We are buying into global GDP growth, not euro area growth,” he says.
The strategy will initially take the form of a focus on the cyclical sectors, particularly consumer-facing ones, accompanied by an underweight position in defensive stocks.
The current political environment (with relation to the sovereign debt crisis) dictates that no aggressive purchase options will be intially employed despite “Europe [being] the cheapest region globally.”
Lilley also dismisses Standard and Poor’s warning to 15 euro area nations this morning as a “shot across the bows” to “keep politicians on their toes” and points to a market reaction which amounts to a 1% drop.
In the case of a mild recession in the eurozone, Lilley has outlined a specific investment model as part of the four investment strategies for the fund and remains confident that a double digit upside can be achieved in the worst case scenario of 20% growth contraction in 2012.
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