Two-thirds of global equities fund managers are overweight Europe, excluding the UK, despite the ongoing eurozone crisis and low growth, says S&P Capital IQ.
But, most of these managers' portfolios hold multinational European companies that do significant business in emerging markets, such as Nestle and Unilever.
One explanation may be that managers are buying European stocks, which are relatively cheap, to gain exposure to fast-growing economies in the developing world. European companies tend to have higher standards of corporate governance than emerging market firms – another advantage.
“The rationale remained that in developed markets better corporate governance prevailed, large-caps were still cheap relative to small-caps and that a holding with multinational emerging markets exposure is preferable to direct investment in a specific country where companies might be looking overvalued,” says S&P Capital IQ fund analyst Susan Sworn.
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