French managers seek defences against slow growth predictions

Fund managers in France are re-positioning portfolios to address global instability.

France’s asset managers all agree on one thing: global growth is under threat. Concerns over the eurozone’s stability have had a negative impact on economic activity in 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 that they believe lie ahead in 2012 and into 2013.

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

They applaud some of the progress made in late July at the summit of European leaders, which aimed to address structural weaknesses in the eurozone. Measures proposed included support for Spain’s banks and the proposed creation of a eurozone banking regulator.

Erratic and unstable

But they remain concerned about the lack of concrete measures in place, the time it will take to devise and implement changes, and the political will to do so.

According to Groupama Asset Management’s chief investment officer Antoine de Salins, “the political situation will be erratic and unstable” throughout 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 the Organisation for Economic Co-operation and Development (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.

It is not just managers who are doubtful. Bruno Crastes (pictured), 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.”

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