While underweight the sector, Walewski says he has been “warming up” to the banks on the view that the credit cycle is turning more favourable. He has thus bought into Spanish banks Banco Popular and BBVA.
“As consumers have more money and companies are full of cash, lending activity should improve and the banks will re-rate,” he says. “Slowly, earnings will go up. The sector has been weak for years but should now begin to perform.”
The target for the Absolute Return Fund Europe is less than half of market volatility. Typically, the aim is for around 4-8%, though Walewski believes investors do accept a degree of volatility, and he accepts he needs that flexibility, “otherwise it is difficult to be a stockpicker of conviction”.
He says: “Clearly, there are a lot of macro swings that have a huge influence on the performance of various sectors or themes. We have seen the long-duration stocks and the exporters rally in the recent past.”
“The best for us is to try and have a diversified portfolio and control our growth and net exposure, our correlation and our VaR,” he says.
“We try to rely more on our stock picks – I don’t like macro or thematic investing. The more we can generate alpha the better.”
Young blood
Still, there is one underlying theme that does play on Walewski’s mind when hunting for opportunities.
He says: “Whether it is in telecoms, banking, consumption or media, we are typically looking for companies with rising prospects, younger customers and younger staff, as these companies tend to do better.
“For example, for beverage companies we are looking for is the next Red Bull. If I can find that I don’t care if I’m paying 22x instead of 18x, it will do massively better.”
