BlackRock value manager sticks with acute Italy overweight

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BlackRock’s Brian Hall is sticking to his overweight stance in Italian equities and believes the country has the tools and necessary support to move onto a firmer economic footing.

Speaking to Citywire Global, Hall, who runs the BGF European Value fund, said he holds over double the benchmark exposure to Italian equities - 10.3% vs. 5.1% in the MSCI Europe Value Net index - and is bullish on its overall outlook.

Hall adopted the overweight almost one year ago based on what he saw as a valuation gap beginning to emerge as the eurozone peripheral debt crisis intensified.

‘We assessed some time ago that the Italian market looked cheap relative to the rest of Europe and we found some pronounced value discrepancies,’ he said. ‘In fact, I think we have been more positive on Europe than a lot of people, we have an overweight in Italy, for example.’

Among his main holdings is Italian toll road operator Atlantia, a 2.7% position in the €316.8 million fund.  He said that while this stock has shown sensitivity to movements in the Italian sovereign yield movements, it remains an attractive long-term purchase.

‘There has been a fall in traffic which can be linked to a fall in consumer confidence. However, it continues to pay an attractive dividend and the outlook is more positive.’

Election expectations

On the immediate horizon is the Italian general election and Hall said, while he will be watching developments closely, he is not considering a shift away from his position.

‘Obviously it has been quite a tough year for the southern Europeans but, at the same time, we could see some positive opportunities,’ said Hall.

‘Of course, we are looking at the election result in Italy and we are hoping for a continuation of the pro-reform agenda and also the Italian GDP to be more positive in the coming year.’

Investors such as AXA IM’s Gilles Guibout, currently the top performing Italian equity manager, expect the reform agenda to be prioritised by voters in Sunday’s polls.

Elsewhere in the fund, Hall has also added to his financials exposure over the past six months. Among those names he has added are Italian banking giant Unicredit and Belgian company KBC.

‘Over the past six months, we have increased our weighting from the high teens to around one quarter of the fund in financial stocks. This is partly driven by the strong support Mario Draghi gave the markets at the end of last year when he removed a lot of headwinds.’

The BGF European Value fund has returned 33.07% in the three years to the end of January 2013. Over this period, its Citywire benchmark, the MSCI Europe Value TR USD, rose 20.58%

Brian Hall is set to appear in the March edition of Citywire Global as part of the ‘Managers to Watch’ feature.