Jupiter shifting into cyclicals

By Peter Starck

FRANKFURT (Reuters) - Jupiter Asset Management is continuing to shift its pan-European equities portfolio towards cyclical stocks such as industrials, away from defensives such as health care, fund manager Cedric de Fonclare said on Tuesday.

London-based Jupiter manages about 1 billion pounds invested in European equities, of which 60 percent is in a pan-European strategy and the rest in a Europe ex-UK strategy.

"The trend is to recycle money from defensives into selected cyclical names," de Fonclare told a briefing for investors and reporters in Frankfurt, Germany's financial capital.

"Before we were looking for defensive growth, now we are looking more for cyclicals," he said.

But not just any cyclicals, de Fonclare said, underlining that his stock-picking strategy focused on identifying companies with strong balance sheets, above-market growth potential and the ability to earn their cost of capital.

Industrials .SXNP accounted for 14 percent of the portfolio at end-May, with health care .SXDP at 13 percent, telecommunications .SXKP at 12 percent and oil & gas .SXEP at 11 percent.

The top five holdings at end-May were cigarette maker British American Tobacco Plc (BATS.L), oil group Total (TOTF.PA), telecoms operator Telefonica (TEF.MC), oil group StatoilHydro (STL.OL) and retailer Tesco (TSCO.L).

De Fonclare told Reuters on the sidelines of the briefing that the portfolio had not undergone any big changes in June.

INVESTORS CAREFUL

He said his step-by-step approach to raising the portfolio's risk profile was driven partly by investor caution.

"People have still been very, very careful," he said.

Jupiter's pan-European strategy delivered a return of 7.2 percent between the start of 2009 and end-May. The MSCI Europe index .MSCIEU gained 4.7 percent in the same period.

Due to its virtual lack of exposure to financials, Jupiter partly missed out on the steep stock market rally that began in early March and continued until mid-June, de Fonclare said.

"We remain careful about financials and particularly careful about commercial banks in Europe. I'm very suspicious about some of the commercial banks," he said, but did not name any.

HSBC (HSBA.L) is the only financial stock among the Jupiter portfolio's top-20 holdings.