Hello and welcome to the Morningstar Series "Why should I Invest with you?" I'm Emma Wall
and I am joined today by Nicolas Walewski, Manager of the Alken European Opportunities
Fund.
Hello, Nicolas.
Hello, Emma.
So this year has been quite a challenging year for Europe and indeed for your fund.
Incredible year, last year, but this year performance has been about flat. What are
the challenges that have held you back?
I think this year we had a couple of stocks at the beginning of the year that didn’t
perform. Thank God, we sold them very quickly but still that hurt us in January and February.
Glencore which is in trouble now, we sold at the beginning of the year and RWE which
also is in deep trouble. Both stocks have huge financial difficulties. That was at the
beginning of the year and then later on in Q2 we have a couple of tech names ASML, Micron,
Seagate and Western Digital in particular. These four stocks have been hurt by some weakness
in demand for the technological products and that has hurt us. We see actually a more balanced
supply and demand since mid-August.
And fans of the fund, investors in the fund will know actually that this sort of volatility
is part of the nature of your investment style. You do take right punchy bets and so with
that in mind do you expect it to uptick again soon.
We hope so. We find, we think there is lot of value in the market. We think there is
lot of value in the fund. We are very excited actually by this correction and we think it
creates plenty of upside for the future.
Thinking of those punchy bets. In 2013 you decided not to expose yourself to stocks that
had emerging market revenues and that paid off well. Obviously now we are having ever
more emerging market volatility. Have you decided to keep that, I mean have you been
hurt by what's happened in China.
I mean we've been hurt a little bit this summer through our auto stocks. We were not in the
German manufacturers, so we thought we were more or less isolated but still our French
auto stocks suffered somewhat. But apart from that we were largely out of emerging markets,
I mean China, Brazil and others. And we view that correctly. We think it's still too early
in general to be in countries, exposed to countries like Brazil or Russia or South Africa
and so on. And even on China we would stay relatively cautious so far.
What would have to happen for you to change your mind?
Good question. I mean there could be many things but we would need to see more sustainable
growth rate in China which we see is not a case yet or a change in political leadership
in Brazil which is not the case yet, you know things like that and all these triggers we
don’t see them yet.
So they are the things that you are avoiding. What about the places that you are seeing
opportunities. What is making you smile at the moment?
Well, Europe, Europe is a good place to be as you know we have seen Europe out of sync
with the rest of the world for many years. The credit cycle was booming in most places
but not in Europe we had austerity measures, we had the sovereign crisis in 2011, which
led to very low, very negative credit cycle. The banks were asked for more capital for
hundreds of billions of more capital and now this credit cycle is turning up. The commodity
price correction which is very strong is fantastic for Europe. So we are very positive on European
demand.
Nicolas, thank you very much.
Thank you Emma.
This is Emma Wall from Morningstar. Thank you for watching.