Politics, volatility, inflation weigh on FIM outlook
Carolus Reincke is a fund selector at Finnish group FIM, a manufacturer that also provides discretionary management in the domestic market. He tells InvestmentEurope about factors weighing on allocation decisions.
FIM is part of the younger set of financial services providers in Finland that sprang up in the late 1980s when local regulation and legislation made possible a viable local mutual funds industry.
From a standing start the firm has built up a business of some €2bn of assets under management overall as of early October 2011, with some €1.4bn consisting of fund assets under management, spread across one of the biggest domestic portfolio teams.
FIM has some 23 portfolio managers, and as the fourth largest domestic manufacturer of equity funds is known for providing access to emerging markets.
Of the assets under management, about €600m is discretionary money, says Carolus Reincke, director portfolio manager, who is responsible for fund selection.
About €60m of that is in outside funds, although the precise value is subject tovariations according to the volatile market seen through the past year.
What really drives selection currently is the attitude to risk, Reincke says. The house reduced its equity exposure through the summer, with substantial parts of the AUM in cash as of early October.
Volatility has played a key role in decision making, particularly because of the political nature of the risk.
Assuming the US remains the leading indicator of where stock markets will go, then there are questions about the direction in the near term, despite some recent positive numbers, Reincke says.
Pretty much every election year since the 1930s has been good to US equity investors – and next year is an election year there.
But he says that the key phrase is “since the 30s”, because that was the last time the world faced a debt crisis.
“I think the election won’t be the trigger for the market to go up or down. There are much stronger forces at work,” he says.
“Of course, being a Finnish firm, the Nordics is a very big area for us. Customers usually look at the Nordics as the home market, and feel comfortable investing here. That’s reflected in the way we invest.”
It is also true, he adds, that investing in Nordic equities can be seen as a proxy play on global equities, because of the importance of such markets for sales by capital goods companies.
The fixed income allocation currently was overweight cash as of early October.
“We are neutral in European inflation linked bonds. We are neutral on emerging market bonds. We are underweight European government bonds and underweight investment grade and high yield,” Reincke says.