Fund buyers in Denmark are united in their assessment of European equities: an improving economy and a cheaper currency on the back of the ECB’s QE will drive profitability. Consequently, they are upbeat about macroeconomic prospects as well, with two thirds having a positive outlook.
Considering the uncertain outlook for most other asset classes, European stocks have few competitors. Against this backdrop, the Danes almost unanimously have the intention to increase their exposure to European equities. An end to the currency peg of the Danish krone to the euro, which would inevitably erode the value of Danish investors’ euro-denominated holdings, would spoil their party.
But none of the fund buyers our researcher interviewed on her trip to Copenhagen and surroundings believes there is even the slightest chance that Denmark’s central bank would give up the currency peg. This became even less likely when its neighbour Sweden launched its own version of QE last month in a move partly motivated by the desire to weaken its currency. Within European equities, Danish fund selectors retain their traditional preference for small caps. Many of them told our researcher they would specifically like to meet high-conviction boutique managers.
Rushing out of US equities
Us equities, which delivered phenomenal returns in 2013 and 2014, have been looking expensive for a 
while, and fund selectors are well aware that the upward trend of the dollar has inflated US equity returns. This year, they expect this to blow up in their faces, so they are looking for the exit: some 44% of interviewees will decrease their exposure to the asset class, while we couldn’t find a single US equity bull in Copenhagen. As one fund selector put it: it will be very hard for the US to surprise positively as the markets are pricing in a steady improvement in macroeconomic indicators in the US, while this is less the case for the consequences of their strong base currency on overseas earnings. The few who are not bearish on US equities as a whole, say they concentrate on value stocks with a relatively high exposure to domestic consumers.
