By Douwe Miedema, European Wealth Management Correspondent
LUXEMBOURG (Reuters) - Few investors would be daring enough to buy banking stocks after this week's dramatic share price drops, but LGT Capital Management is doing exactly that, betting they will recover.
The unit has benefited from being underweight on financials for one and a half years, but LGT is now picking banks and insurers where it sees little risk, fund manager Marcel Schnyder told the Reuters Funds Summit.
"We were going to neutral in the financials sector, we are overweight insurers, underweight banking," Schnyder said.
"We have also bought some banking stocks, (such as) Unicredit (CRDI.MI: Quote, Profile, Research, Stock Buzz), we were looking for banks that were not so exposed to the subprime problems, we tried to hide there."
LGT Capital management is an asset management unit of LGT, a Liechtenstein-based bank for rich clients.
European banking stocks have lost a quarter so far this year and took another beating this week when Bear Stearns BSC.N was forced to sell its business, after traders had stopped doing business with it fearing Bear might go bust.
Most of LGT's buying had been in insurers, whose prices also dropped because some had been exposed to subprime assets, or because they had been insuring credit products that lost much of their value when the credit crisis spread.
"We've bought some financials in the European sector ... for example Fortis (FOR.AS: Quote, Profile, Research, Stock Buzz) (FOR.BR: Quote, Profile, Research, Stock Buzz) or Prudential (PRU.L: Quote, Profile, Research, Stock Buzz)," Schnyder said. Continued...
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