Espen Furnes at Delphi sees euro vision

Espen Furnes, Norwegian manager of the Delphi Europe equity fund, believes the recent Dutch elections coupled with the ongoing benefits to Germany of the euro means the future of the single currency is far more secure than some believe.

It is clear from the results of the Dutch elections recently that there is support for the euro in that country, and that this in turn provides further stability for investors considering that market, he said.

“From the investor perspective it gives a certain level of confidence in the euro, but also to the Netherlands, and investing in the Netherlands.”

Delphi has relatively low exposure to the Netherlands, but is looking to increase this going forward. This is not a direct result of the election, Furnes stresses, but because of increasing investor appetite.

There are still significant barriers to euro stability, but the recent plan outlined by European Central Bank president Mario Draghi should help the peripheral eurozone members, Furnes said. Additionally, the decision by the German Constitutional Court to enable participation in the ESM was a definite “Go” from Germany, he said.

However, while an important step in the way out of the eurozone crisis, it will take time to see the effects.

“It is not solved, but we may be on our way to a solution that works.”

Furnes also believes that the euro-sceptics, who condemned the euro, have been shot down to an extent. They may need to rethink their view.

“From my perspective, I have some connections with contacts among larger long only funds in the US. They have kept away from eurozone investments for a long time. But they are starting to think about investing in the eurozone, on the basis their belief that this is a solution that can work is much higher than it has been for a long time.”

Many investors remain wary of the risk associated with Europe, and are clearly underweight the region, Furnes said. It will take time to turn around the view of the mass of investors, because people want to see real improvements, real growth before they switch allocation.

“It’s a bit too optimistic to believe that the mass of investors will invest heavily in European equities. I think we will see a gradual change through next year.”
What should not be in doubt is Germany’s ongoing commitment to the single currency, Furnes said.

The country may in certain circumstances be perceived as critical and opposed to the euro, but from an economic perspective, from the 1950s through to the introduction of the euro, the country had to fight the effects of the Deutsche Mark. Furnes said that as the country’s economic prospects improved the currency became increasingly expensive, this forced German businesses to become better, but it also acted as a drag on margins and profitability: Furnes believes that these have never been better than since Germany entered the euro.

“Germany has got away from a currency that persisted in putting a stick between the wheels of profit generation. German industry has never been better. Margins have been very good under the euro regime. At their hearts, Germans are pro-euro.”

Thus, despite the issues affecting the peripheral members, the euro has been a success for Germany, he said.


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