Last updated: 23:54 / Monday, 12 September 2016
Analisys by Natixis

Two Distinct Ways To Diversify With European Equities

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Two Distinct Ways To Diversify With European Equities

Growth and portfolio diversification potential – along with attractive valuations, euro vs. US dollar and accommodative monetary policy – are reasons why investors may find European equities attractive. Consider these two distinct equity approaches provided by Natixis Global Asset Management.

High-conviction European equity investing

Award-winning European specialist boutique DNCA Finance has followed a consistent investment process based on fundamental active management for more than 15 years. Their philosophy remains focused on high-conviction European securities with an eye toward long-term risk-adjusted returns.

Seeking value across European companies

European Value team manager Isaac Chebar believes DNCA’s rigorous stock selection through fundamental analysis across all market capitalizations is a key differentiator for the firm. 

“Consistency in the investment process throughout various market environments, in-depth analysis and special attention to volatility control is integral to our success,” said Chebar. Being benchmark agnostic and focused on mid- and long-term performance is critical, too.

Growth momentum in European equities

European Growth team manager Carl Aufrett thinks European equities remain one of the most attractive asset classes. “We take a highly active approach to find attractive growth potential among quality companies. Most of the companies we follow, we believe, have little or no correlation to the European economic cycle and tend to follow more independent growth trends,” said Auffret. These companies are European, but they generate a large amount of their sales internationally.

More information on DNCA’s high-conviction value and growth approaches can be accessed at www.ngam.natixis.com.

Low volatility European equity investing

Seeyond employs an active model-driven approach that seeks to capitalize on risk to create value.  Its minimum variance approach is an investment style designed to provide equity market exposure but with less risk than the overall market by investing in low volatility stocks.

“We believe uncertain market conditions are driving a growing demand for minimum variance equity strategies,” said Emmanuel Bourdeix, head of Seeyond and Co-CIO at Natixis Asset Management. These minimum variance strategies focus on investing in low-volatility stocks that have little correlation to each other. They typically therefore have lower volatility than the market capitalization-weighted indices used by many investors. “I think many investors would be surprised that the most volatile stocks have typically underperformed the least volatile stocks over time,” said Bourdeix.

Low volatility doesn’t mean minimal returns

According to traditional portfolio theory, taking less risk by purchasing low-volatility stocks should reduce performance. But Seeyond’s research shows that low-volatility stocks have generated about the same long-term returns as the main indices, but with far less volatility. Why is that? “We believe this anomaly is directly linked to the bias in the financial behavior of equity investors. They tend to overpay for the ’glamour stocks,’ overpaying for discovering the next big tech name or rising star, at the expense of the so-called ’boring stocks.’ And typically, over a full market cycle, these low-volatility stocks tend to outperform the overall equity market.”

With volatility capable of rising at any time, it’s important to remember that there are ways to make the equity component of portfolios more resilient.

For more on Seeyond’s low-volatility approach to European equity investing, go to www.ngam.natixis.com.

*Seeyond is a brand of Natixis Asset Management, operated in the U.S. through Natixis Asset Management U.S., LLC.

Risks: Equity securities are volatile and can decline significantly in response to broad market and economic conditions.

In Latin America: This material is provided by NGAM S.A., a Luxembourg management company that is authorized by the Commission de Surveillance du Secteur Financier (CSSF) and is incorporated under Luxembourg laws and registered under n. B 115843. Registered office of NGAM S.A.: 2 rue Jean Monnet, L-2180 Luxembourg, Grand Duchy of Luxembourg. The above referenced entities are business development units of Natixis Global Asset Management, the holding company of a diverse line-up of specialized investment management and distribution entities worldwide. The investment management subsidiaries of Natixis Global Asset Management conduct any regulated activities only in and from the jurisdictions in which they are licensed or authorized. Their services and the products they manage are not available to all investors in all jurisdictions.

In the United States: Provided by NGAM Distribution, L.P., 399 Boylston St., Boston, MA 02116. Natixis Global Asset Management consists of Natixis Global Asset Management, S.A., NGAM Distribution, L.P., NGAM Advisors, L.P., NGAM S.A., and NGAM S.A.’s business development units across the globe, each of which is an affiliate of Natixis Global Asset Management, S.A. The affiliated investment managers and distribution companies are each an affiliate of Natixis Global Asset Management, S.A.

This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary. The views and opinions expressed may change based on market and other conditions.

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