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Top BlackRock L/S duo cut UBS amid financials fears

Top BlackRock L/S duo cut UBS amid financials fears

Citywire AAA-rated duo David Tovey and Simon Hunter have cut Swiss banking giant UBS from their sector-leading long/short equity fund over fears about the wider financials sector.

Hunter and Tovey are currently top of the 126-strong Alt Ucits – Long/Short Equity sector on a three-year total return basis for the performance of the BSF European Opportunities Extension fund.

In the most recent update for the €623 million fund, Tovey and Hunter said they have further increased their underweight to financials by exiting the Swiss company.

‘The weak global environment evident in the first quarter, combined with the ongoing headwind of a low interest rate environment, has put the sector under significant pressure,’ the duo said, who have 14% exposure to financials at present.

This move came against the backdrop of the fund increasing its net and gross exposure over the month, which reflected wider positivity about global growth. This saw net exposure reach 101.59% and gross exposure increase to 157.49%.

However, Tovey and Hunter said the uncertainty being caused by the looming UK referendum on leaving the European Union was causing a number of investors revaluate their European equity exposure.

‘We think investors will remain cautious towards European equities until the British referendum is behind us as this is the most prominent risk event not only for the UK, but also for the broader European Union.

‘Within this context, we retain a keen eye on valuation and we continue to focus on stock selection against a volatile market. We are sticking to companies that offer attractive earnings momentum and stock-specific drivers and looking to avoid value traps in highly cyclical businesses without momentum.’

The BSF European Opportunities Extension fund returned 101.6% in euro terms over the three years to the end of April 2016. This compares to an average manager return of 9.79% over the same timeframe.

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