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.
The groups he mentioned had a relatively straightforward business model and no exposure to structured products. Schnyder also mentioned Zurich Financial Services Group (ZURN.VX: Quote, Profile, Research, Stock Buzz) from Switzerland and Germany's Allianz (ALVG.DE: Quote, Profile, Research, Stock Buzz).
"We bought (the financials) a bit too early. In January or February this year we bought insurers, in the last few weeks we bought banks," he said.
Schnyder's funds had also benefited from being overweight on emerging economies and underweight on the U.S. dollar. The bank's strategy was to stubbornly stick to trends it had perceived, at the risk of sometimes getting out too late.
"It could be a little bit late to go out, we don't reach the top, that's clear," he said.
Clients had pulled some money out of LGT funds in the current market rout, Schnyder said, with steady inflows into hedge funds, despite the fact that that sector had proven not to be immune to the credit crisis either.
"Fixed income is not so cheap, it's not easy to know what to do," Schnyder said.
(For summit blog: summitnotebook.reuters.com/)
(Reporting by Douwe Miedema; editing by Elaine Hardcastle)
© Thomson Reuters 2009. All rights reserved.
| Health | Nov 09 - 12, 2009 | Health |
| Autos | Nov 02 - 4, 2009 | Autos |
| Middle East Investment | Oct 26 - 28, 2009 | Country Summits |
| Washington | Oct 19 - 21, 2009 | Country Summits |
| Global Wealth Management | Oct 05 - 7, 2009 | Financial Services / Exchanges |
