Financière de l’Echiquier sees reasons for re-risking in 2013

Marc Craquelin, CEO and member of the executive committee at Paris-based asset manager Financière de l’Echiquier, believes the ECB’s action over the summer has laid the foundation for re-risking

After months of crisis and uncertainty, the Eurostoxx index rose by 20% in just two months, complementing a robust rally for the euro.

“It was a nice period. It is now risk-on for the stock market and for corporate bonds,” said Craquelin (pictured) in the firm’s latest webcast to investors. “And both of those asset classes we have favoured since the beginning of the year.”

The more stable situation in Europe was supported by an improving macro-economic outlook for the US, with especially interesting news from the housing market. “We had strong words from (ECB President Mario) Draghi, which were very important. He produced an intelligent and clever plan that worked both financially and politically. It’s not easy to satisfy everyone with the same plan, and of course it is still very complicated.”

He believes interest rates are set to remain at zero for some time, and that GDP growth is likely to be close to zero for months or even years. “The question is how to take advantage of the situation? Low rates mean borrowers can get 1.6% for seven year bonds and 2% for 10 year bonds. At those levels companies can finance projects round the world.”

He said the firm is still positive towards corporate bonds, and now is perhaps the time to take on more risk. “We would go towards high yield,” he added. “If the eurozone remains stable, it will encourage appetite for M&A activity, there are some good stories already.”

Through three funds – the stock-picking €935.6m Agressor fund, the €177.7m diversified ARTY fund, and the €72.2m Echiquier Global, the firm is preparing to re-risk ahead of 2013.

The ARTY fund, managed by Olivier de Berranger, holds a “nice balance” between sector-leading stocks and value stocks in its equity allocation, and corporate bonds, said Craquelin. The fund has returned 9.6% year to date.

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