WHILE THE overall Irish market might be in the doldrums, for “patient stock pickers”, Irish equities can provide rich rewards, says a global equities expert.
Pointing to the relative out-performance of Irish companies such as CC Group, Paddy Power and Kerry Group, Ireland is a “stock picker’s dream” says Rick Lacaille, global chief investment officer with State Street Global Advisors (SSGA).
Lacaille, who is responsible for a global portfolio worth some $1.9 trillion, says the Irish story is one that is split in two, on the one hand are the companies driven by exports, and on the other those exposed to the domestic economy, such as the banking sector. In this regard, it is proving to be attractive for stock pickers who look at the underlying business, rather than the overall market.
He is quite bullish on equities. “Equities are fairly valued at present and are attractive,” he says, but adds that whether or not you invest, will depend on your risk profile, pointing to the possibility for further volatility.
While Lacaille acknowledges that some might see US equities as “pedestrian” in the current environment, he says SSGA is currently over-weight in the market, pointing to its potential for providing a decent return.
“There is a potential benefit from both the domestic economic recovery and the export market.”
Lacaille is not too upbeat on the prospects for Chinese equities. “We’re more neutral on China,” he says, adding that while SSGA is forecasting GDP growth of about 7 per cent this year, he is cautious on the stock market, raising the possibility of a “hard landing”.
Instead, SSGA is following a policy of staying under-weight in the big emerging markets, such as the Brics (Brazil, Russia, India, China and South Africa), and going over-weight in the mid-size economies, such as Indonesia and the Philippines.
In European equities, SSGA is also under-weight, with Lacaille saying the “growth picture is more challenging”.
And while he says he understands the historical preference among Irish investors for a home bias – diversification is key to SSGA’s strategy.
However, it’s not just enough to diversify equities amongst regions – as the recent downturn showed, you also need to diversify amongst asset classes.
“You need to look at things that behave differently in times of crisis, so it could mean less orthodox investments,” he says.
Lacaille was in Dublin to speak to clients of State Street, which employs over 2,000 in Ireland, mostly in funds servicing. It ramped up its Irish fund management capabilities just over a year ago when it bought Bank of Ireland Asset Management.
