French asset manager Carmignac Risk Managers, with EUR52 billion under management, is bearish on equities and not very optimistic on markets generally.
The audience at their January meeting in Paris heard Didier St Georges, managing director and member of the investment committee, say that in 2016, the year of the monkey in Chinese astrology, the firm needed to resolve old problems in an unorthodox manner in order to make money.
Jean Médecin, European portfolio manager and portfolio advisor, reports that last summer saw the firm dramatically reduce its equity exposure in Patrimoine, the firm’s diversified fund, from 45 per cent – out of a potential maximum exposure of 50 per cent – at the beginning of the summer, down to 12 per cent as markets reacted to news from China.
“I think what we have seen is a lot of people trading momentum, rather than fundamentals,” Médecin says. “The fundamentals have been overcoming the ‘put’ of the central banks and every indicator does not point to a strong macro market.”
The firm believes that Europe is impacted by the US decoupling which is making it sluggish. “There is a struggle with deflationary pressure across the world as China exports deflation and central banks are aware of imbalances created by their intervention, and not ready to react immediately any more,” he says.
Patrimoine ended 2015 with a return of 0.72 per cent, largely earned in the final quarter, post all that shedding of equities.
Continuing with the bearish theme, Global Manager, Frédéric Leroux, says: “There is no cushion in equity markets and hedging must be at its maximum until signs of a downturn fade, but the violent adjustments will create huge opportunities and 2016 could be like 2009, a year of rebound. It is a message of optimism, we’re just not all that optimistic.”