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Eurozone’s conflicting interests to increase economic and social divergence

Absolute Return – Monthly Commentary

Improving economic statistics in Europe have sent long sovereign bond yields and the Euro higher, negatively impacting bond holdings, according to The Absolute Return strategy team at QUAERO Capital.

The team, Edouard de l’Espée, Sébastien Waefler and Cristofer Gelli note that renewed uncertainties on the French elections, divergent attitudes in Europe about military budgets, and other manifestations of weak European leadership, all point to the basic dilemma for the Eurozone: the bloc’s current economic and monetary set of principles and regulations do not include mechanisms to compensate efficiently for lack of competitiveness in certain member countries, an unforeseen consequence of their lost monetary independence.

To make things worse, political and social institutions in Italy, France or other members are not conducive to rapid adaptation against external changes, while German opinion remains hostile to massive transfers to weaker members. “It is then hard to imagine these conflicting interests being reconciled rapidly. That allows for economic and social divergences to increase even more across Europe,” the managers note.

The stronger world economic growth expected this year is likely to come from emerging countries, rather than the Eurozone, where a large part of the economic unbalances still lies. That is the underlying reason why sovereign spreads have recently widened in Europe, and why in January capital flows withdrew from European towards emerging equity markets.

This contrasting horizon between the above longer term perspectives and short term European economic recovery make European markets a slightly uncomfortable place.


Notes to Editors

QUAERO Capital

QUAERO Capital is an independent Swiss fund management firm founded in 2005 as “Argos Investment Managers S.A”. Renamed in 2015, the firm’s approach is to identify and foster innovative, independently minded, investment teams who use original research to provide actively managed strategies to potential clients in the institutional and wholesale markets.

A team of 29 people includes 17 experienced investment professionals. It is a 100% employee-owned company. QUAERO is regulated by the FINMA, the Swiss Financial Markets Authority. It offers a range of high conviction investment strategies spread across 12 funds in two Luxembourg SICAVs (a Part I-UCITS and a Part II).

Absolute Return Team

Cristofer Gelli co-founded QUAERO CAPITAL SA in 2005 as Chairman, Partner and Fund Manager. He launched Argos Investment Fund in 2002 and QUAERO CAPITAL SA (formerly Argos Investment Managers) in 2005 and has been Chairman of the company since its inception. He is also Chairman and co-founder of the Geneva-based wealth management company Gadd & Cie S.A.

Edouard de l’Espée joined QUAERO CAPITAL SA in 2014 as a Fund Manager. He started his career in 1972. Building expertise in macro-economic analysis, he has been managing bond funds for over 25 years, earning Standard & Poor’s distinctions for outstanding performance over 3, 5 and 10 years. Edouard co-manages a dynamic yield portfolio in the Argos fund range.

Sébastien Waefler joined QUAERO CAPITAL SA in 2014 as a Fund Manager – he is also a Managing Partner at Compagnie Financière Aval SA. He has more than 15 years of asset management experience and is a member of the Swiss Financial Analyst Association (SFAA). Sébastien co-manages a dynamic yield portfolio in the Argos fund range.

Compliance Notes

This article is specifically provided for use by media representatives in the UK. The views expressed are those of the fund manager at the time of writing, and may have since changed. Although the best available sources are employed, there is no guarantee as to the accuracy of information presented in this document. The article is for information only and should not be construed in any way as a purchase or sales recommendation. The analyses and conclusions detailed in this publication may be revised at any time. Past performance does not guarantee or predict future performance.

The information provided is copyright of QUAERO Capital SA - a public limited company (société anonyme) under the laws of Switzerland on 22 April 2005. Its registered office is situated at Route de Pré-Bois 20, Case Postale 1875, CH-1215 Geneva 15, Switzerland. The company is regulated as an Asset Manager of Collective Investment Schemes by the Swiss Financial Market Supervisory Authority (FINMA).

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