How we build our US exposure

Multi-managers tell Alasdair Pal their thoughts on North America and explain which blend of funds they use to access it...

Times have been tough for North America. With the S&P500 down 10% in the last three months, investors have been pulling out of the region with abandon. But while traders remain bearish on North America, fund managers are taking a longer view.

Professional Adviser speaks to three multi-managers about the strategies they use to invest in North America.

Joe Le Jehan

Cazenove Capital Management

While we are beginning to be marginally more positive on some of the more cyclical sectors within European equity markets, valuations in the US do not yet look as attractive.

Although some near-term economic data appears “less worse” than expected in the US, recessionary risks have not entirely dissipated. As such, we continue to believe relative value in the US lies in some of the more cautious, less cyclical areas – sectors such as pharmaceuticals and consumer staples, for example.

Funds such as Heptagon Yacktman US Equity, with its focus on valuation, offer interesting exposure to this space. The Yacktman team concentrates on buying out of favour companies, with ultimately strong franchises and good management.

Importantly, though, there is recognition that there are points where price can over-ride quality. At times, the team has shown a willingness to rotate its portfolio into some of the more beaten up cyclical areas looking to capitalise on the over-reaction of markets – as in early 2009. Again, though, valuation drives the team’s process.

Along similar value-driven lines, the JPM US Equity Income fund continues to be an important holding in our portfolios. Its income screen provides good exposure to areas such as healthcare and telecoms – areas at this point we still believe offer interesting opportunities.

Ryan Hughes

Skandia Global Dynamic Equity fund

We are underweight in North America, and relatively close to our minimum allocation. It is not so much our specific thinking around North America, but relative to the value we see in other markets.

Over the course of the last four or five weeks there has been better economic data coming out of the US, along with good corporate earnings. But we currently see better value in Asian and emerging markets and that will lead to a lower allocation in developed markets like the US.