Well, not exactly, but in the past couple of days I have been fortunate enough to hear from both emerging markets veteran Mark Mobius and European equities guru Nicolas Walewski.
The latter is the lesser-known of the two but by no means less impressive.
Track records
In a career spanning 20 years to date, Walewski has specialised in running European equity portfolios and managed the Oyster European Opportunities Fund from 1998 until he set up Alken Asset Management in 2006.
Since he started managing money Walewski has outperformed the STOXX 600 returns index by over 6% per annum after fees.
Meanwhile, in the red corner, Mobius’ reputation precedes him. He started at Franklin Templeton in 1987 when the group launched its first emerging markets mutual fund, he now directs the company’s entire research team based in 18 global emerging markets.
The graph below shows his performance versus his peer group composite in the emerging market space since 2000.
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Wise Walewski
Walewski is fairly contrarian in his views: he thinks of all the “money-printing” nations the UK is the one going about it in the most sustainable fashion.
“They are restructuring the country, so we are not totally surprised to see some development in the UK economy. In many other countries you have to ask if they have done anything to improve productivity?
“A lot of these central bankers and politicians think you can have everything all at the same time and printing gives them time and an excuse to do nothing. They are just kicking the can down the road,” he explained.
In the Alken European Opportunities Fund, which has outperformed the benchmark by 42.8% since inception in 2006 (as at 31 May), he has a significant overweight to France (23% versus 15% of the benchmark) and despite his comments about the UK he is materially underweight the country (9.28% versus 35% of the benchmark).
Political risk
Walewski is under no illusions the political risk remains high in Europe, but as a bottom up stock picker he does his utmost to block out the noise.
He considers Germany to have peaked in terms of corporate profitability, while France and Italy continue to follow a downward trend.
Spain, on the other hand, has undergone some painful restructuring since 2008 and so company profitability has been recovering since 2009.
“Spain was like France and Italy until it was on the brink of bankruptcy. I have said before I like companies that have been through bankruptcy, there is nothing like it to focus the mind. The same is true of countries.
“It would be great if France would go bust, that is what they deserve (and I am only half joking)!” he added.
Europe vs. EM
From Walewski’s point of view emerging markets are not that interesting and “a lot of money can be made in Europe”.
The graph below shows the relative performance of MSCI Europe, MSCI Emerging Markets and MSCI World over the past year, with Europe significantly ahead.
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The past does not relate to the future performance of each market, but it is worth noting neither region looks expensive: the MSCI Emerging Market index has a estimated PE of 10.34, while EuroStoxx (300 most liquid shares in the Euro area) has an estimated PE of 12.53 based on analysts’ estimates.
Final frontier
Of the various markets he looks after, Mobius thinks the best opportunities are in frontier markets, Eastern Europe and smaller companies.
Poland, Romania, Austria and the Baltic states should throw up some investment ideas going forward.
In his $2.2bn Frontier Markets Fund, which was launched four years ago and is already closed to new investors, Nigeria, Saudi Arabia and Qatar make up the largest positions.
However, Mobius could not help but lend support to one of investors’ major concerns with these countries: In extolling the virtue of the rule of law trickling down to Eastern Europe via the European Union, Mobius highlighted the lack of corporate governance still visible in many EMs and frontier nations.
Following the sharp market correction we have seen in the past couple of weeks, if you are thinking about topping up some regional exposure, it could do to keep Mobius’ point in mind.
If you had to choose between emerging markets and Europe, where would you put more of your clients’ money? Let us know in the comments box below…
