Fund Manager Who Called Brexit Hoards Cash for France Vote

  • Pictet’s multi-asset head Stanion has doubled cash allocation
  • European stocks may rally if moderate candidate wins: Stanion

Le Pen vs. Melenchon Runoff Is Disaster, Says Adam Posen

It worked for Percival Stanion as European markets were gripped by a selloff after the Brexit vote. Now he’s loaded up on cash again before the first round of France’s presidential election Sunday.

The London-based head of multi-asset funds at Pictet Asset Management Ltd. welcomes surging volatility as a two-way race gets underway where anti-euro nationalist Marine Le Pen is likely to feature. He’s doubled his cash allocation to 19 percent, readying to snap up European stocks at bargain prices.

“Our general expectation is that Le Pen will fail,” Stanion said. “We will run large positions on cash: cash has optionality.”

If a more moderate candidate prevails in the final vote in two weeks, rebounding growth and corporate earnings will propel stocks higher, according to Stanion. Polls put Le Pen ahead for the election’s first round and losing in the runoff May 7.

Portfolio allocations since Brexit vote by funds in BoAML survey

Money managers often turn to cash as a shock absorber through periods of turbulence. According to a survey published by Bank of America Corp. this week, they’re currently holding 4.9 percent of their portfolios in cash, compared with a 10-year average of 4.5 percent.

Stanion, an early pioneer of multi-asset funds, which invest across stocks, bonds and even planes and tankers, joined Pictet from Baring Asset Management Ltd. with two colleagues in 2015. Since then, they’ve boosted the assets in the Dynamic Asset Allocation Fund to 528 million pounds ($676 million) and outperformed 94 percent of peers in 2016, according to data compiled by Bloomberg.

Before the U.K. voted to leave the European Union in July, Stanion put 30 percent of the fund into cash, enabling him to buy U.K. home builders and miners at depressed prices after the referendum. After trailing U.S. peers for most of last year, euro-area stocks outperformed in March. And with valuations at a 47 percent discount to U.S. counterparts on price-to-book value, according to Societe Generale SA strategists, there’s room for growth.

“The big risk for Europe is probably the next economic cycle,” Stanion said. “Long-term there’s a huge question mark over Europe as anti-establishment parties draw ever-increasing support from younger voters bearing the cost of years of austerity and recession.”

— With assistance by Sid Verma

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