Perhaps the most surprising decision taken by John Bennett, who manages €10.7 billion ($11.2 billion) as part of Henderson Global Investors' pan-European equity team, was to start buying European banks in the second half of last year.
But it's all part of Bennett's conviction that European stocks will climb the so-called 'Wall of Worry' this year despite fears caused by elections in the Netherlands, France and Germany, and that bond yields have bottomed.
Bennett shares the view of other asset managers that banks are "the most difficult thing to own in Europe." However, he now sees an opportunity in buying carefully chosen stocks in the sector, which is a key part of his strategy of shifting toward value investing from growth. He particularly likes the Nordic financial institutions.
"The Nordics learned the lesson and the madness of empire building," Bennett said, recalling the early 1990s when Nordic banks had a severe crisis after a lot of their loans in shipping and real estate went sour.
"The Nordics learned and consolidated. When you consolidate banking and it becomes an oligopoly and stays domestic, it actually can become a good business," he said. "The problem with bankers is they want to plant flags. Banks are mature cyclicals, which is why they like to do fancy stuff."
Instead, banks should just "stick to their netting" and try to grow organically by focusing on certain areas of their business where they can do well, in Bennett's opinion.
Close Brothers' (LON:CBG) banking arm "lends to guys or women with diggers who build houses, or a guy or woman with a restaurant -- just basic, nuts-and-bolts banking," according to Bennett. Banks can grow organically with that kind of strategy, in Bennett's view.
"Look at Svenska Handelsbanken (STO:SHB-A, SHB-B), which I think is the gold standard for European banks," he said. "They're opening branch by branch in the U.K. and the Netherlands. If you have targeted, organic growth, it can work."
Another Nordic bank that his fund owns is Nordea Bank; its New York-listed ADR symbol is (NRDEF) . This Swedish bank is engaged in corporate banking as well as retail and private banking. Norway's largest financial services company, DNB (DNHBY) , is also among the stocks the Henderson European Focus Trust owns, as is Denmark's Danske Bank (DNKEY) .
Outside the Nordic banks, Bennett's fund also has stakes in Dutch banks ABN Amro (AMS:ABN) and ING (ING) , Belgium's KBC (KBCSY) , Italy's Intesa Sanpaolo (ISNPY) Spain's Bankinter (BKNIY) and Caixabank (CIXPF) and France's BNP Paribas (BNPQY) and Societe Generale (SCGLY) .
For years, banks in Europe and elsewhere have been weighed down by falling interest rates, which have eaten into their margins. And despite rising inflation, it does not look like the European Central Bank is in a hurry to raise rates any time soon.
"I don't think interest rates need to go up for banks to work. They just need to stop going down," Bennett said.
However, there is the big caveat to his strategy. "If bond yields roll over and we go back to negative yields, it knocks value on the head and it certainly knocks the banks on the head."