Alken’s Walewski makes major cyclical shift

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Citywire AA-rated manager Nicolas Walewski has trebled his exposure to utilities and increased his weighting in financials as he takes a considerably more cyclical approach.

Walewski, who last week announced the soft-closure of his €4 billion Alken Fund - European Opportunities fund, said he had opted to make a significant move into deep value stocks and away from some quality growth plays.

This has seen him reduce exposure in his long-held top sector bet IT, which fell from 34% of the fund in August to 29.8% in the September fact sheet, while also trimming exposure to consumer discretionary and consumer staples.

Commenting on the change in his most recent market update, Walewski said he had opted to turn his attention away from long-standing bets, which he defined as oligopolistic situations, innovators and low cost business models.

‘Following a couple of years of relatively stable positioning in the fund, when we favoured stocks that we believed were least sensitive to the macroeconomic environment we have gradually started to rotate the portfolio into more cyclical and value plays.’

‘Valuations seem somewhat stretched in some of the quality growth names that have outperformed over the past few years and we see most value in selected stocks in sectors like utilities, construction and financials to which we have been adding over the past few weeks.’

The biggest beneficiary in the fund is the utilities sector, which has seen exposure increase from 3.42% in August to 9.3% one month later. This is while Walewski increased his financials weighting to 12.2%, up from 9.6%.

Elsewhere in the fund, Walewski said performance had recently been hampered by one of his longest held positions, telecoms company Iliad, which suffered from some profit-taking after two strong years of performance.

In addition, low cost carrier Ryanair was also named as a detractor. ‘The main reason is some apparent softness in yields achieved in the September/October/November bookings.’

‘This however does not seem to be related to a lack of market discipline but is rather self-inflicted by Ryanair,’ he said.

The Alken Fund – European Opportunities-R fund has returned 54.2% over the three years to the end of September 2013. Its Citywire benchmark, the STOXX Europe 600 TR EUR, rose 32.13% over the same period.