The three key questions for all investors: Why this strategy? Why now? Why pick it over its peers?
Investors wanting to justify an allocation to European equities in 2026 need look no further than the prospect of earnings growth, according to Fabio Di Giansante, portfolio manager at DNCA Finance, an affiliate of Natixis Investment Managers.
“This is exactly the point where earnings should start to grow,” he says in the above WealthWhys video. “Earnings in Europe have been flat for the last two years – we haven’t seen any earnings growth – but consensus is expecting double-digit earnings growth this year.
In terms of relative positioning, having earnings growth will justify the multiple that has been rerated in the last year.”
“This might be too aggressive but, regardless, it will be the first year – and it will be followed by next year too – when you see earnings growing. This is very important because, in terms of relative positioning, having earnings growth will justify the multiple that has been rerated in the last year.”
In addition to this inflection point in earnings, Di Giansante highlights the continent’s relative stability adding: “Compared to the rest of the world seeing many uncertainties, it will maybe drive flows in an asset class that has been hugely penalised in the last few years.”
‘Building block’
Asked what he believes sets the European equities strategies run by the new team at DNCA Finance apart from their peers, Di Giansante replies: “First of all, we are a blend in terms of philosophy, mindset and product.
“Having a blend product without trying to time ‘growth’ or ‘value’ is very important – and very relevant also, because the shift between growth and value now these days happens quite quickly. From an asset allocator point of view, capturing these trends is becoming more and more difficult – and being a blend ourselves is a great thing to have as a ‘building block’.”
Turning to the team itself, Di Giansante says: “We are coming from many different experiences but I would say we share one important thing, which are the soft skills that are very relevant in this industry. Having the same intrinsic motivation – the ‘thinking like an elite sport’ kind of approach – is what we do.”
WealthWhys – with Fabio Di Giansante,
portfolio manager at DNCA Finance, a Natixis business
A full transcript of this interview can be found after this box while you can view the whole video by clicking on the picture above. To jump to a specific question, just click on the relevant timecode:
00.00: What is the base case for European equities?
01.44: Why should investors consider European equities right now?
02.55: Why should people invest with this strategy rather than any of its peers?
What is the base case for European equities?
Well, the base case for European equities, I would say, is a once-in-a-lifetime opportunity. It seems that Europe is doing its homework now – pressured by the situation outside of Europe – and we have seen for the first time fiscal spending co-ordinated by different countries that should bring Europe to the forefront of the investment community.
European companies are clearly cheaper than US companies in terms of asset class. Europe is cheaper – and that has been justified, up to now, by earnings that have been lacking in terms of growth, compared to their US peers. That seems to inflect now exactly because we have this impulse, which is going to stimulate the growth in Europe.
And some of the euro companies are also very good because you are going to play also some thematics globally – where we have evidence in Europe of great companies. On top of that, if you think about artificial intelligence, I think in the future what is becoming relevant is the usage of AI in terms of productivity improvement.
And if you want, Europe is, for once, going to come out better because – in terms of inefficiencies, or percentage of labour cost as the total cost – it is much higher in the global context. So if you think about companies that can enjoy some sort of productivity gains, Europe clearly I think ranks best in terms of global asset classes.
Why should investors consider European equities right now?
I’d say that right now is exactly the point where earnings should start to grow. So earnings in Europe have been flat for the last two years – we haven’t seen any earnings growth – and consensus is expecting double-digit earnings growth this year.
This might be too aggressive but, regardless, it will be the first year – and it will be followed by next year – when you see earnings growing. This is very, very important because, in terms of relative positioning, clearly, having earnings growth will justify the multiple that has been rerated in the last year.
We have seen some multiple rerating without earnings growth and this is going to change. So the top line is going to be a beneficiary of this fiscal spending, monetary situation, which is good – and the bottom line is also, as I said, in terms of productivity, going to start to earn the benefits of this AI implementation across the board.
So it is an inflection point in earnings, I think. And the political stability, if you want – compared to the rest of the world seeing many uncertainties – will maybe drive flows in an asset class that has been hugely penalised in the last few years.
Why should people invest with this strategy rather than any of its peers?
Well, first of all, what we do is we are a blend in terms of philosophy, mindset and product. So I think having a blend product at this point in time is very, very important.
What the market is paying for at the moment is diversification. Last year, diversification happened to be more at a geographical level – so other asset classes performed better than the US. I think this diversification angle is expanding into sectors and this will be even more relevant than stockpicking.
So I think that having a blend product without trying to time ‘growth’ or ‘value’ is very important – and very relevant also, because the shift between growth and value now these days happens quite quickly. So from an asset allocator point of view, capturing these trends is becoming more and more difficult. So being blend ourselves is a great thing to do as a ‘building block’.
And in terms of our team, it is a brand-new team. We are coming from many different experiences but I would say we share one important thing, which are the soft skills, which are very relevant in this industry.
I think having the same intrinsic motivation, which is the ‘thinking like an elite sport’ kind of approach, is what we do. So having a structured process, which is what we have, and a unified language is, I think, a winning proposition. That is what I think is a competitive advantage and the edge in our team.
