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This 'sleeping beauty' is ready to awaken: Amundi

Despite Europe's struggling economy, the continent's equities are poised to outperform their U.S. counterparts in the year ahead, Pascal Blanque, global chief investment officer at Amundi, told CNBC.

"Europe is a sleeping beauty waiting to be awakened," Blanque said, adding "we will see diversification outside the U.S. next year due to maturing valuations." Amundi Asset Management has more than 750 billion euros ($1.02 trillion) under management.

Blanque expects U.S. political risks will also weigh on sentiment towards U.S. stocks, anticipating a replay of the "fiscal cliff" political stalemate over raising the debt ceiling to allow the government to continue paying its bills.

(Read more: Europe stock rally running out of steam: Morgan Stanley)

A bull and a bear statue stand outside the Frankfurt Stock Exchange
Ralph Orlowski | Bloomberg | Getty Images
A bull and a bear statue stand outside the Frankfurt Stock Exchange

In October, Republican members of Congress blocked a debt ceiling increase, forcing an over two-week-long government shutdown which ended with an agreement to let the Treasury continue to paying bills through February 7.

"We know the date. There is a risk," Blanque said. "There is a risk tail attached to U.S. assets. They cannot be considered as a risk-free asset (any longer)."

Europe is a preferred destination for portfolio shifts away from the U.S., Blanque said.

(Read more: European shares to double within five years: Barclays)

"There is a cyclical recovery, even modest, at work. Valuation considerations, dividend (and the) M&A cycle are alive and kicking," he said, noting he expects profit growth of more than 10 percent.

In addition, the region is starting from a very underweight position in global portfolios, Blanque said. He is positive on European midcaps and domestic cyclicals.

To be sure, not everyone expects Europe can overcome its economic hurdles.

(Read more: Why Europe may not get much cheaper)

European economies and markets are "sclerotic," Jim McCaughan, CEO of Principal Global Investors, told CNBC. Principal's parent, the Principal Financial Group has around $450.6 billion under management.

"I don't see where the growth in Europe is coming from. The deleveraging process hasn't started yet. The debt levels in Europe are way too high. The banks are way too weak; they're all undercapitalized; they can't lend,"McCaughan said. "I don't see how Europe pulls out of the slough, I must admit. I see very high unemployment all across Europe and no reduction in unemployment."

(Watch this : Why Europe continues to underperform the U.S.)

Others are also less positive on the continent, with Morgan Stanley this week downgrading its view on Europe's equities and bonds to neutral, viewing the risk-reward profile as stronger in the U.S. and Japan.

The bank cited concerns Europe's economy faced "Japanification," or a long period of entrenched economic stagnation similar to Japan's around two-decade-long slump.

But Amundi's Blanque does have an answer to concerns over Europe's economy: "You don't need to see European growth going through the roof to be long European equities next year. "

By CNBC's Leslie Shaffer. Follow her on Twitter: @LeslieShaffer1

Correction: An earlier version of this story incorrectly stated that Amundi has $1.02 billion under management; it has $1.02 trillion under management.

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