Jupiter’s de Fonclare limits domestic Europe exposure to banks

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Jupiter European equity fund manager Cédric de Fonclare’s recent increase in exposure to European banks proves an exception to his avoidance of domestic names, particulalry in southern Europe.

The manager of the £768.3m Jupiter European Special Situations fund remains underweight financials but has recently increased exposure to European banks, bringing the weighting to around 11 per cent versus the 13 per cent of the benchmark.

De Fonclare explains that the increased exposure is part of a longer-term move away from the fund’s historical underweight and selectiveness in financials and particularly banks.

He says: “In 2012 a lot of fund managers like myself were hiding in some of these Nordic banks, which were trading at a premium to their peer group.

“So I decided for the first time to broaden our exposure to financials by including a position in UBS, which fits more into the category of recovery names.”

More recently De Fonclare has gone on to take positions in BNP Paribas and a small position in Italian bank UniCredit to further reflect the variety of banks in Europe.

He says: “When it comes to financials in the portfolio I wanted to hedge myself against the benchmark to some extent. We still want to be selective about how well and where banks are in their recapitalisation process, and take valuation into consideration.

“It is a very hard game, that is why I wanted to minimise the risk here in the portfolio and focus stock picking elsewhere.”

The addition of European banks marks one of the few areas where the fund is exposed to domestic Europe, says De Fonclare, in preference to internationally-focused stocks.

UniCredit is also an example of De Fonclare’s limited exposure to southern domestic Europe. He says: “I am more exposed to core Europe in countries like the Nordics, than southern Europe.

“In southern Europe I tend to favour international names, with the exception of financials, where I bought more recently a small position in UniCredit.”

De Fonclare attributes the decision to buy UniCredit to recent signs of stabilisaiton in the Italian economy, as well as the lower risk profile associated with the European crisis and the stock’s “sharp” valuation discount.