Milan Fund Selector Forum: The benefits of information

Emerging markets, European and US equities and market volatility were all discussed at InvestmentEurope’s latest Fund Selector forum in Milan.

InvestmentEurope’s latest Fund Selector Forum in Milan garnered delegates from across the country to hear thoughts and discuss issues relevant to emerging market, European and US equities, as well as emerging market debt and equity volatility.

Speakers included James Ross, senior portfolio manager at AllianceBernstein, Thanos Papasavvas, fixed income and currency strategist at Investec Asset Management, Wahid Chammas, portfolio manager at Janus Capital Group, Colm D’Olier, deputy fund manager at M&G Investments, and Sam Richmond-Brown, product specialist at Seeyond, which is a strucured product and volatility investment divison of Natixis Global Asset Management.

The day also presented findings of research into trends among Europe’s fund selector community from Incisive Research, and its director of Research Des Cahill.

Delegates were also treated to views on “The Future of Equities”, in a panel debate involving Chammas, Richmond-Brown and Ross.


AllianceBernstein’s James Ross identified ongoing recovery in the US as a key factor for those looking at equity assets there.

US Treasuries look expensive compared to global equities, but US consumers are gaining in confidence, he said. This is important because of the 75% of the economy that is accounted for by consumer spending. The recovery has taken spending back to the time of the credit crunch, while “the overall consumer picture looks very supportive and the corporate picture also looks encouraging.”
The chance for a collapse in the US is actually low, he added, with yields relatively low, but still good, while dividends are ”quite high”.

Asked whether growth in the US will come more from revenues or from cuts, Ross said: “It has to come from revenues, but that depends on the economy.”
Ross also explained that AllianceBernstein’s philosophy looks at keeping a long-term focus on the company outlook as well as a short-term awareness. From the US perspective there were signs of recovery seen in the EU, he added.

Emerging Markets

M&G’s Colm D’Olier addressed the issue of investing in emerging markets, warning against the risk of investing in countries exclusively on the basis of growth rates.

“Growth is not the only factor investors should look at while making investment decisions,” D’Olier said.

Three other factors should be kept in mind too: return on capital, valuation, and corporate governance.

“Growth does not always create value. Actually, economic growth has delivered lower shareholder returns,” D’Olier pointed out. By way of example, he compared shareholder returns in South Africa and Russia. The African country has done much better, a difference he puts down to the fact “South Africa understands the importance of shareholders and has invested more in innovation.”

The danger of investing only on the basis of growth, explained D’Olier, showed in 2007, when brokers would invest in a company “whenever a company had the word Sino or China in its brand.”

Looking ahead, it is now emerging markets such as Thailand is where M&G sees more investment potential. “Thailand is the example that valuation matters,” D’Olier said. “They did a lot in terms of valuation and corporate alignment and now Thailand is the most booming economy and everybody is interested in investing there.”

Companies should look to their corporate governance, operational performance, innovation, and ability to shrink and focus.


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