Geffen backs Monti to steer eurozone out of meltdown

Neptune founder and CEO Robin Geffen has ruled out the possibility of a eurozone breakup following a meeting with Italian Prime Minister Mario Monti.

Geffen is so encouraged by the PM’s plans for the country, which he said is at the “epicentre” of the eurozone’s problems, he believes Monti’s drastic actions will help resolve the crisis by 2015.

“Italy is a large domino that cannot be allowed to fall over. It is encouraging to see a prime minister with considerable support from voters taking difficult actions, which he is aware could burn up this support, in order to get Italy back on the straight and narrow.

“He will sort Italy out and step down when the job is done in 2015.”
Geffen attended a roundtable in London with the PM last week, in which Monti said he is expecting strikes due to some of the policies he will need to implement. However, he expects the populus to come onside in time.

“We rate Monti as an economist and he encourages me to believe in the Neptune thesis that the euro is not going to fall apart. It will be managed in an effective way by Italy, Germany and France. 2012 is going to be a tough year for European equities, but the economy is not going to implode,” added Geffen.

Although he pointed to Hungary as one of the nations that might not pull through, the manager said a country with a market cap half the size of Apple’s can easily be rescued.

He added the weakness of the euro will be beneficial as exports to the US and Asia are growing.

Geffen also said there will be “absolutely no hard landing” in China, and is optimistic for emerging market returns in 2012.

“Up until December we had five consecutive quarters of emerging markets underperforming mature markets, which has been almost unparalleled for two decades.

"Emerging markets have had a very strong start to Q1 and the consensus forecasts are far too bearish. We think 2012 will be like 2009 in relation to emerging market outperformance.”

He added China is in good shape, and forecast growth of 8.5% this year, while Brazil, Russia, and India will also beat expectations in the coming 12 months.

Geffen is responsible for £3.6bn in funds across the global, income, Russia, China and managed sectors.The £1.08bn Global Equity fund's has seen a dip in performance over 2011, driven by its 40% exposure to EMs, Geffen said.

Over the 12 months to 6 January the fund lost 17.4%, compared to the sector average loss of 9.6%, according to Morningstar.

"We had a high weighting to emerging markets and China, Russia and India all underperformed. The fund underperformed like it did in 2008 for the same reason - emerging market exposure. But this is part of our long-term belief in emerging markets and we are entirely comfortable with our exposure."

He added the exposure he did have to the US and UK performed strongly and although he was underweight the US, he had the largest exposure the fund has ever had to America in its ten-year history.

"We increased exposure to the US in December and we added two big stocks in the energy area as oil and gas companies are ramping up capex given the higher oil price. We believe these stocks will perform better than they did last year but overall emerging markets will outperform mature markets this year."

Geffen is also sticking by his underweight developed market financials and rules out investing until the banks return to growth.

"A number of the banks are heavily undercapitalised and will need rights issues. We would not want to be invested in companies carrying out rights issues particularly after what happened to Unicredit."