Pan-European:Growth Over Size - UK:Japanese Style

- Pan-European — Growth Over Size
• Size matters — Mega- has underperformed mid- and large-ex-mega-cap in both rising and falling markets. Growth concerns and lack of inflows have been a headwind.
• Mega appeal — We are happy to own mega-caps exposed to our key investment themes: (1) growth and (2) B/S strength & quality, e.g. BHP, Novartis & ABB.
- UK — Japanese Style
• Mega cap still underperforming — UK mega-caps lag again despite earnings, yield and balance sheet support. Liquidity favours mid- and large-ex-mega-caps.
• Give up or get even — With flows weak, the best chance of outperformance comes from either retiring mega-cap equity or breaking up the mega-caps.
Citigroup European Portfolio Strategist 20100722

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