France's ratings downgrade: who called it?

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Ratings agency Moody’s has stripped France of its much-vaunted AAA credit rating and put it on negative watch but which fund managers were already ahead of the game?

The sanctity of France’s credit rating had been under scrutiny for a considerable amount of time and some leading names in French fund selection had been vocal in their concerns.

With today’s announcement of a downgrade to a AA1 rating, managers such as Bruno Crastes and Jacques Chahine, as well as former UBS economist Dr. Klaus Wellershoff can feel vindicated.

Speaking in September, as many investment groups and pension funds were enticed by high yields from French government bonds, Crastes went as far as to brand France ‘the biggest risk to Europe’.

The fund manager predicted a potential downgrade would trigger a mass sell-off among investors, who had been previously not been swayed by poor financial results or high unemployment figures.

Speaking at the Citywire's Italian retreat in October, Wellershoff had singled France out for criticism and, along the same lines as Crastes, pinpointed it as a major threat to Europe as a whole.

‘The focus will slowly go away from the southern European countries and go to France,’ said Wellershoff, who also pointed to the high structural deficit and a housing market which he said is primed for a correction.

French investment firm Carmignac were discussing the potential for a downgrade as far back as October 2011 when deputy managing director Eric Le Coz said it had become ‘inevitable’ due to the austerity-led economic policies.

Veteran investor Jacques Chahine was another to forecast a downgrade. Chahine, who runs the Digital Funds Stars Europe fund, said France ratings loss would be hastened by the election of Francois Hollande as president.

This was echoed by Old Mutual’s Euro Stars A-rated manager Stewart Cowley. Cowley, who said he was short France in September, stated Hollande had come to power after winning the contest to ‘put the most unrealistic plan to the French people’.