In the final installment of our exclusive interview with Alken’s Nicolas Walewski, the boutique founder revealed how he bounced back from Brexit blues.
‘We lost a lot of money on the Brexit day and it was a bit of a disaster for us. But we did nothing because it was a knee-jerk reaction and stocks came back with a vengeance a couple of months later’, he told Citywire Selector.
With 16.07% of the Alken Fund European Opportunities strategy currently positioned in the UK, Walewski said the team had hesitated at the beginning of this year to buy domestic UK stocks.
'We still haven’t and it’s been the right thing to do as they have underperformed, because of the election result and the huge uncertainty that you can see with the pound. There has been no improvement, but the uncertainty could help equities over time.
'The feeling I have now, but I have been wrong several times, is that inevitably because the UK government can’t agree on anything they will kick the can down the road. They are totally divided and there doesn’t seem to be an alternative elsewhere, there doesn’t seem to be a solution.'
Elsewhere, Walewski, who has 8.70% of the portfolio allocated to financials, said the outlook for European banks has improved very significantly.
'Banks are not as risky as they used to be. We started to buy banks 12 months ago, then in the middle of the first semester, we cut back on our banking exposure because we thought rates were not going to rise much.
'They dipped and then they came back, so they haven’t really gone up since we sold the banks. Some banks will perform well because they are doing the right thing by restructuring, and will also benefit from rising rates.'
Walewski said banks are losing market share due to new entrants and more focused players in the sector.
'You have to be selective. More than the banks, the real estate sector has been attractive up until now – except the UK. The UK is a special case because of Brexit. The stocks look cheap and they are struggling to perform because of the uncertain political landscape.
'For the rest of the continent, the outlook looks bright. A lot of real estate developers and REITs have been performing well on construction stocks. The sector is doing well especially in countries like Spain, Ireland, and Germany.
'In Germany, you have had a bear marker for 20 years now and there is a strong imbalance between demand and supply, the German economy is firing on all cylinders,' he added.
Over the three years to the end of July 2017, the Alken Fund – European Opportunities strategy returned 21.09% in euro terms. This compares with a 23.13% rise by its Citywire-assigned benchmark, the FTSE World Europe TR EUR, over the same time period.