RLAM’s Lilley claims euro is ‘too big to fail’

Royal London’s Kevin Lilley is confident in the strength of the euro despite the ongoing troubles in some eurozone countries.

However, he is finding more growth opportunities in US-facing European stocks.

The manager of the £559m European Growth trust says European companies exporting to the US are benefiting from its growing economy and the weakening euro.

In recent weeks he has introduced a 1.4% holding in Heidelberg Cement and 1% in Buzzi Unicem.

“Last year and early this year I was looking for exposure to the Bric-type markets, but the US economy is expecting GDP growth of 3% this year,” he says.

“Both these companies have decent exposure to the US market, which is seeing a pick-up in housing sales.

“Also, the stimulus package is still filtering through and these companies are beneficiaries of the strengthening US dollar through their exports.”

Other holdings that generate earnings from the US include Arcelor Mittal, BMW and ING.

Turning to the present macroeconomic problems in the eurozone, Lilley is sanguine about high debt levels in Greece, Portugal and Spain and confident in the resilience of the euro.

“The euro is too big to fail. If it did it would be a Lehman-type event and that will not be allowed to happen,” he says.

“Greece is grabbing the headlines and dragging down markets, but if you look at what is going on underneath, company earnings have been better than expected, and all these companies get a big currency benefit from what’s happening to the euro,” he adds.

The fund has returned 73.5% in the five years to 19 April, 2010, compared to an IMA Europe ex UK sector average of 56.3%