Edmond de Rothschild launches contrarian eurozone fund

Eurozone equities could be set for a bumper year with Paris-based Edmond de Rothschild Asset Management backing the asset class with the launch of EdR Euro Convictions.

The new fund will invest in eurozone equities selected from the group’s four European strategies, including EdR Europe Synergy, EdR Europe Value & Yield, EdR Selective Europe and EdR Euro Leaders.

The fund’s manager, Olivier Huet (pictured), admitted it was “a bit contrarian” to launch this fund while the eurozone crisis continues to drag down equity valuations.

However, “maybe the crisis is slowly beginning to settle – valuations could quickly see a correction and risk premiums could be reduced on a global basis,” he said.

“Eurozone equities can move in an upwards direction in 2012. 2011 was reined by fear and all of the eurozone’s problems were exposed. This year, the surprises will be more positive than negative,” Huet added.

He warned that the boost to equity prices seen in January 2012 is unlikely to continue throughout the year.

Edmond de Rothschild AM is not the only group to have backed equity markets this year. Swedish group Skandia recently said it expected a “wall of money” to flow back into equity funds in 2012.

Huet said he favoured sectors with exposure to emerging market and international growth, although the fund has no strict thematic investment criteria.

The stocks in the fund’s universe (roughly 100-150 companies) have already been subjected to fundamental analysis since they are held in the company’s four European equity funds.

After filtering out stocks which are not in the eurozone, 80-90 names remain. A review of the macroeconomic and stock market environment follows to pinpoint the 30-50 stocks which make up the final portfolio.

Huet expects the fund to outperform the four other EdR equities funds in the long term, having selected the most promising stocks in their portfolios. However, certain stocks will be excluded do to the fund’s strict eurozone focus – three of the four EdR equity funds focus on Europe, rather than the eurozone.

The fund has been launched across Europe in the UK, France, Germany, Italy, Spain and Benelux. It is primarily aimed at European institutional investors, although it also has a retail share class.

It has the same investment process as a dedicated euro equities fund Edmond de Rothschild AM has been running for a large French institutional investor for two years. This fund outperformed its benchmark, Eurostoxx (net dividends reinvested), by 4.5% in 2011, Huet said.

Edmond de Rothschild AM’s total assets under management in European equities is roughly €4.9bn.

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