La Française shifts to France underweight, favours peripheries

French fund manager La Française Asset Management has gone underweight on allocation to its domestic economy, and is instead steering investors towards bonds issued by fundamentally weaker Portugal, Spain, and Italy.

The change in the firm’s position makes France the only euro zone country apart from Greece that the asset manager views negatively on fundamental and tactical grounds.

In a briefing on its strategy for 2012, the firm told investors France is negatively positioned from a macroeconomic perspective. Market perception, expected fund flows and valuation of the economy were other negative factors cited by La Française. The firm added France has a poor ratings perspective, following the decision by S&P to downgrade the country’s debt from AAA to AA on Friday 13 January.

A presentation by managers at La Française showed the firm’s view of France’s position only differed relative to Greece on a fiscal and wider macroeconomic level. Greece received a “double negative” overall rating from the firm however, due to its extremely weak fundamentals.

Seeking returns amid market volatility, La Française will not look to Europe’s strongest economy Germany but to other weak peripheries, notably Spain, Italy, and Portugal.

Directeur Général des Placements at La Française Pascale Auclair said Germany could be weakened by debt collectivisation within the euro zone, while the firm thinks fund flows to the country and its valuation will turn negative.

That tactical view is in contrast to the country’s fundamentals-which are still rated positively, the firm said.


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