Selectors discuss austerity backlash, volatility and liquidity issues

The latest roundup of fund selector views finds that volatility and liquidity issues are front and centre, particularly given the recent backlash against austerity delivered by voters in different European countries.

gardner-timAusterity backlash fuelling volatility   

Name: Tim Gardner
Title: Co-Manager
Company: Legal & General Multi Manager
Base: London


How do you view voters’ reactions to austerity in Europe?

The increasing backlash against Europe’s drive for austerity is playing out at the election box. A clear example is the shift towards extremes in the first round of the French Presidential ­election, where the Far-Right National Front party picked up close to 20%.

Elsewhere, the recent collapse of the Dutch government, after its failure to agree on budget cuts, is further evidence of the rise in austerity fatigue. It raises doubts over whether even the ‘core’ countries can commit to such measures.

Perhaps these developments will result in the austerity advocates among Europe’s political elite waking up to the fact that austerity with no growth does not present a sustainable means of bringing down debt ratios over time.

Until credible plans are put in place to resolve the issues at the heart of the European sovereign debt crisis, market flare-ups and heightened volatility are unlikely to disappear.


wiedmann-dirk-rothschild-wealth-management-cutout1Interesting but volatile   

Name: Dirk Wiedemann
Title: Head of investments
Company: Rothschild Wealth Management
Base: London


How do you view emerging market bonds?

Emerging market bonds are interesting, but ­volatile, and can be attractive for the medium term. We believe many currencies are well placed to strengthen against those of the advanced economies, as the underlying economic fundamentals are typically stronger.

Valuations should be supported by lower or stable interest rates, and by international capital flows seeking positive real returns. But we expect this asset class to remain volatile.

Emerging currencies are far from a safe haven, and a long way from becoming substitute reserve currencies. In addition, they are likely to continue to suffer during periods when investors globally become more risk averse. This is particularly true in South Africa, Turkey and Hungary, which rely on external financing.


buclez-francois-cube-capital-cutoutInvesting in managers   

Name: François Buclez
Title: Founding partner and CIO
Company: Cube Capital
Base: London


Why do you take a top-down view of the world when allocating between hedge fund strategies?

Yes, we are very top-down in terms of allocation, and we express our views by investing in managers. We move our exposure to different asset classes, regions, strategies and through to managers – quite aggressively. When there is an inflexion point in the environment, we tend to switch 60% to 70% of the exposure we have.

When we remain in the same environment, we may tweak the fund of funds at the margins, maybe shifting 15% or 20% of the portfolio. At present, we do not have a lot of equity exposure – about 20% – but when we do like equities, you still will not find us in global equity long/short managers. It will be more the sector specialists.
We may think, for example, there is a ­specific argument for investing in healthcare or ­technology.

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