European equity star Nicolas Walewski’s financials exposure has taken on a distinctly Latin flavour after he recently increased his weighting with the purchase of a number of domestic Spanish banks.
In his latest quarterly investor conference call on Tuesday, the founder of London-based group Alken AM, who recently regained his place among the rated elite with a Citywire A-rating, said:
‘We have increased our exposure to financials but have to remain prudent as we are still in an economy with low if not zero growth.’
His financials allocation currently accounts for 10% of his fund.
In recent months he has been increasingly vocal of his support for Europe's periphery, backing Ireland and Portugal in June for the strides they have made in tacking their debt and later increasing his Italian exposure through companies like motorway toll group Atlantia and financial services firm Mediolanum.
In the last two months his team has bought up domestic Spanish banks, avoiding the market’s big names such as Santander and BBVA, and Walewski said the big catalysts were the comments made by Mario Draghi and the OMT plans.
His colleague and financials analyst Antoine Badel said they were avoiding Spain’s largest banks due their high valuations and there was more upside to be found in some of if its domestically-focused banks - Banco Popular was among the main purchases the team made over Q4.
‘It is a big Spanish bank and is showing great efficiency in Spain. It is trading at 50% below book value and we bought it around the end of November.’
Walewski’s team believe that Spain could be reaching an inflection point and valuations of key domestic banks could be set to rise.
‘The macro outlook is improving and the restructuring of its labour market is underway and has more flexibility,’ said Badel.
‘The big budgetary efforts are behind us and we believe Spain is nearing the end of its austerity measures and it will soon start to reduce.’
Badel also added that in December banks announced that the property market is nearing clearing point which would help improve their books.
‘It is the first time in years we can see that Spanish banks' net results will grow. On top of this there still remains the European rescue package which will be major catalyst for the sector.’
‘Mariano Rajoy should call for it in coming months and the cost of borrowing for banks will go down.'
‘This will have big impact on the Spanish banking sector. Domestic banks have been depressed and their value has dropped significantly.’
However, Walewski pointed to a potential scenario where Spain could improve without aid.
‘It is not excluded that Spain gets out of this without asking for a bailout. So we can understand why he is waiting before asking.’
Over the past three years his Alken European Opportunities fund has returned 34.65% while his benchmark, Stoxx Europe 600, has risen 28.5%.