Going underweight financials brings outperformance to Mandarine Gestion

French asset manager Mandarine Gestion outperformed its index, CAC All Tradable, in February by going overweight the industrial, automotive and technology sectors and underweight energy, financials and consumer goods.

The fund, Mandarine Opportunités I, returned 5.91% last month bringing year to date performance to 13.6%. By contrast, CAC All Tradable returned 4.77% last month and is up just 10% this year.

The fund, which invests exclusively in French equities, has a cumulative three year performance of 65.5%, compared to the index’s 35%.

The fund’s main holdings bear notable difference to the index’s weighting. It is underweight Total at 5.2% compared to the index’s 11.56%, overweight BNP Paribas at 5.2% versus the index’s 4.6%, and overweight Compagnie de Saint-Gobain (a construction manufacturer) at 3.93% compared to the index’s 1.86%.

Although the fund is underweight financials overall, BNP Paribas made the biggest contribution (0.69%) to its performance last month. Renault followed, contributing 0.45%.

According to Joëlle Morlet-Selmer, head of French equities at Mandarine, the fund has outperformed due to the strength of its cyclical allocations, particularly to automotive and related companies such as Renault, Valéo and Alten.

This has been complimented by holdings in traditionally defensive companies, she added, such as Ingénico, Technip and Bic. Ingénico alone has seen 8% growth in 2012, while Technip has signed its biggest contract to date, a five year deal with Petrobas in Brazil, worth $2bn.

The fund’s year to date performance has already reversed last year’s losses when it was down 10%. Although disappointing, this still outperformed CAC All Tradable, which was down 16.9% last year.

Equity markets have rebounded in 2012 and investor appetite has closely followed. Efama data shows net sales of equity funds bounced back in January to register net inflows of €4bn, compared to net outflows of €6bn a month earlier.

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