Willem Vinke is portfolio manager for the EI Sturdza Strategic Europe Value Fund comments on the implications of the Greek crisis.
I struggle with the outlook this year more than I have in the past. This is because I think we live in a world where the uncertainty has intensified.
The growth rates in Europe have not been what people thought they would be a year ago. Personally I struggle with the direct macro-economic impacts of the action taken by the European Central Bank (ECB). I think the biggest effect will be the weakening of the euro. This will have a positive impact for a country like Italy where a weak euro will hopefully start to regenerate a growth in GDP. The effect of the oil price coming down will be positive for Europe generally.
In the short term the outlook seems positive. The risk assets will probably carry on performing given the actions of the ECB. A strong US dollar is good for corporate earnings for many of the multi-nationals in Europe. We are very well positioned and I think this has been one of the big drivers for our performance over recent months. If all goes well we will see acceleration in growth rates from the countries that have struggled so far.
There are also political risks out to consider. We have Greece and the United Kingdom – the United Kingdom will be a very close call.
As a portfolio manager, the most important element of risk management is to get your stocks right. I like to keep position weightings similar because you never know where the performance comes from. None of the stocks should be at risk of blowing up a portfolio, and therefore I tend to run positions in equal sizes.
We aim to limit volatility and downside risk in several ways. We monitor trading liquidity, we have no micro-cap exposure, and we may use derivatives to further mitigate downside risk. Finally, I am personally coinvested in the fund.