Gavin Launder, head of European equities at Legal & General Investment Management (LGIM), is considering moving back into European banks, while he has also bought a position in airlines for the first time in two years.
Launder, who manages the £155m L&G European Trust, said the portfolio's lack of exposure to banks had helped him in the fund so far this year. European banks have taken longest to recover from the global financial crisis compared to the US and UK and Italian banks have been particularly hit in recent months during the country's elections.
The fund currently has 8.2% allocated to financials but zero exposure to banks, after exiting the last banking position in Italian bank Unicredit earlier this year.
Launder's fund has returned 2.2% over the last six months to 23 July, according to FE, versus losses of 1.5% by the IA Europe ex UK sector. In turn, since the start of 2018 the FTSE World Europe-Banks index has lost 9.2% in sterling terms.
Launder said: "We have been helped by not having banks as they have underperformed so much lately. UBS is the only one we hold but we do not consider this a bank as it is mostly asset and wealth management."
But he said is considering going back into the space, although he would need to be prepared for volatility.
"It might be tempting to go back into them, European interest rates are unlikely to go up and if this is priced in then that would be interesting.
"You have to be prepared there could be a sharp fall in shares but remain convinced of the long-term story."
The most appealing banks, Launder said, were those in France, Spain or Italy as they offered the best option to play a domestic recovery. These included Société Générale in France and Sabadell in Spain, which recently acquired TSB.
The L&G European Trust has returned 7.5% over one year to 23 July, according to FE, versus returns of 2.8% by the IA Europe ex UK sector.
Meanwhile, he has taken a position in Hungarian airline Wizzair in his £213m Growth Trust which he said benefits from migrant travel between Eastern Europe and the UK. This is his first position in an airline business for two years.
"The firm is a very low-cost business with a strong balance sheet and a young management team. It would be suicidal for the UK to stop migrant workers coming to the UK, especially for seasonal work and the NHS."
He said he preferred Wizzair to Irish airline Ryanair as he expected chief executive Michael O'Leary, who has been the driving force behind the business, would retire soon. It has also come into trouble with airline unions as many of its pilots are self-employed.