Fidelity’s Siddle: Europe back to 2007 conditions


Fidelity fund manager Matthew Siddle says Europe is starting to resemble pre-crisis conditions, but individual economies still face challenges.

Siddle, who manages the £6bn Fidelity European Growth fund and the £180m Fidelity European Large Companies fund, also regards MSCI’s recent classification of Greece as an emerging market as having no significant impact due to the small percentage it takes up on indices.

“We are seeing financial conditions in Europe returning to the best have been since 2007. It is clear that financial stress has been quelled by the ECB’s actions,” the manager says.

“Since 2012 we have seen sharp reduction in the cost it takes for banks to finance themselves. Bank bond yields are now at an all time low, less than 2 per cent.”

However, Siddle is mindful that at a regional level there are still challenges for European countries with fiscal deficits still having “some distance to travel”.

Siddle says: “For instance, the government debt for Italy and Spain is still rising.

“It’s not clear that local government deficits and local banks are compeletly out of the woods, despite improvements in financial conditions.”

Regarding his portfolio, Siddle made changes at the end of 2012 to give greater weighting to consumer discretionaries and staples which has rewarded him with an increase in over 10 per cent in performance since the beginning of the year. Siddle has also continued to be underweight on financials.

Siddle says: ”There was a significant increase in both consumer sectors. This was funded by selling technology and material names. Since the start of the year, these sectors have had good performance.

”On average, financial companies are relatively low quality businesses because they have products which are not differentiated, have strong competition and the return on assets are low.”