French managers seek defences against global growth fears

France’s asset managers all agree on one thing: global growth is under threat. Concerns over the Eurozone’s stability have negatively impacted economic activity within Europe and elsewhere. Weaknesses are evident in both the US and Chinese economies. As investment markets collectively digest poor data, fund managers in Paris are repositioning their portfolios to cope with further challenges they believe lie ahead in 2012 and into 2013.

Weaknesses in key global economic indicators were revealed from May 2012, showing hopes of a slight ease in investment conditions outside Europe at the start of the year were short-lived. France’s asset managers blame Europe’s sovereign debt crisis for the drag on growth they expect to take place over the rest of this year.

They applaud some of the progress made during the summit of European leaders held on 28 and 29 July aimed at addressing structural weaknesses within the Eurozone, such as support pledged for Spain’s banks and the proposed creation of a Eurozone banking regulator. But they remain concerned about the lack of concrete measures in place, the time it will take to devise and implement those, and the political will for doing so. According to Groupama Asset Management’s chief investment officer Antoine de Salins, “the political situation will be erratic and unstable” through 2012.

As a consequence, the firm expects growth rates to fall across the US, the Eurozone, Japan, and China, to a greater degree than predicted by OECD and EU estimates, and even more than the consensus reached among other analysts. The investment environment will become murkier, with MSCI Europe-listed firms’ profits likely to fall 1% on average in 2012, following psychological damage inflicted by 2011’s falls, says Groupama Asset Management’s head of equities Claire Chaves d’Oliveira.

Not only the managers are doubtful. Bruno Crastes, chief executive of H20 Asset Management, a global macro multi-strategy boutique based in London and backed by France’s Natixis Asset Management, says “investors are very negative on Europe, especially on the Eurozone”.

Curiously for France, Convictions AM’s chief investment officer Alexandre Hezez thinks it may now be one of the best-positioned economies within the Eurozone. Of Italy, Spain, Greece, Portugal, Finland, and France, only the latter has shown an improvement rather than a fall in industrial production. But it all depends what budgetary measures President François Hollande pursues and how those play out. There’s nothing to judge yet, Hezez adds.

President of Convictions AM Philippe Delienne (pictured) adds a word of caution that France faces a competitiveness problem, and also needs to address its deteriorating current account.

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