The headaches besetting globally oriented investment managers are constant, but the pain essentially has two sources: slow economic growth and the European sovereign debt crisis.
Greece has struck a debt-restructuring deal with its private creditors, and a path seems clear to a second bailout from international lenders, but investment managers are sensitive to the volatility and losses that investors in international markets suffered in 2011. And there's still a lengthy list of problems to confront.
For a sense of how asset managers are coping with the current global investment climate and to understand their worst fears, MarketWatch spoke to five seasoned professionals who are based outside of the U.S., from London to Hong Kong, about their biggest stock-market worries:
Khiem Do: Baring Asset Management
"How is it going to end?" Khiem Do asked about Europe's debt troubles. "How much has to be written off and who is going to take the haircut?"
In response to this uncertainty, Do, manager of Baring Asset Management's Asia Pacific Fund (APB) and head of the investment firm's multi-asset management for Asia, is steering clear of banks in the U.S. and in Europe that are closer to the crisis. The Hong Kong-based fund manager is investing in Asian banks instead.
At the same time, Do added, "We don't want to be too bearish on the U.S. economy right now." So the fund manager favors U.S. utilities, telecommunications, consumer staples, technology and energy stocks.
"If there were to be a massive selloff in European banks due to any of the macro risk," he said, these sectors would still do all right. "They are more stable companies."
Rainer Baumann: Sustainable Asset Management
Rainer Baumann, the Zurich-based head of portfolio management at Sustainable Asset Management, is concerned that U.S. economic growth this year will fall short of expectations of 2%-plus.
"Fundamentals seem to be fragile," Baumann said.
Sustainable Asset Management, which oversees about $11.4 billion in assets, says it invests only in companies that are sustainable leaders, which acts as a natural hedge. "Our companies are more stable and robust," he said.
Plus, he added, companies with a clear way of addressing long-term trends, problems and risks can often work through tough times.
Roche Holding AG (RHHBY, news), for example, has a place in the SAM Sustainable Global Equity Fund.
Roche, Baumann said, has an ideal combination of attractive fundamentals and valuation. IBM (IBM, news) is also in the fund. "It's a company that outperforms and their policies and strategies address future challenges or future risks," he said.
Didier Saint-Georges: Carmignac Gestion
Economic growth is also key for Didier Saint-Georges, member of the Investment Committee at Carmignac Gestion, which has more than $59 billion under management. He said the Paris-based company has been progressively raising exposure to equities after paring back in 2011.
"Europe is in the doldrums. U.S. growth is stabilizing at an average level, but we have good prospects for consumer-led economic growth in emerging markets," said Saint-Georges. "Therefore we are avoiding very domestic sectors and we favor companies which will be positioned to capture demand, which will be mostly in emerging markets."
He added: "In addition to holding European and U.S. exporters, we have a lot of Chinese, Indian, Brazilian and Indonesian stocks oriented toward local consumer demand," such as electrical appliance companies and local car distributors.
Dividends are not the main draw. "One has to be very careful in an economic downturn about sustainability of dividends in this environment, in that growth is a scarce resource. We think if we find good growth stories we get better performance," Saint-Georges said.
The Carmignac Investissement Fund's second-biggest holding is Apple (AAPL, news). Saint-Georges said the firm likes the company for its growth story, but also for the potential that Apple could one day pay a shareholder dividend.
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