How US managers weathered the storm

Charlotte Richards finds out how US managers have navigated a difficult period and assesses the impact the eurozone crisis has had on the market.

Over the past 12 months, sentiment towards the IMA North America sector has been extremely volatile due to a variety of global financial and macroeconomic fluctuations.

In February 2011, it was one of the top five best-selling IMA sectors, with net inflows of £216m. Three months later it was the worst-selling, with outflows of £153m. However, despite being a sector of continuous instability, managers are confident about the future of the region.

One sector which has proved resilient throughout the downturn is information technology.

Grant Bughman, client portfolio manager of the UBS US Growth fund, says Visa, Apple, Baidu, and Qualcomm were among the largest contributors to the performance of his fund. The £64.5m fund ranks third over three years to 4 January, returning 56.92% against the 35.33% IMA North America sector average, according to Morningstar.

Bughman says his strategy of not holding underperforming mega-cap stocks such as Hewlett Packard and Cisco, paid off.

However, Brad Sorensen, director of market and sector analysis at Charles Schwab, says while the information 
technology sector is set to offer steady growth, it is not all positive.

He says increasing global competition in particular areas with lower labour costs could likely continue to compress profit margins. “Governments are reining in spending, which could dampen investment in technology-related projects,” he adds.

Meanwhile, Tom Marsico, manager of the £346.5m Henderson US Growth fund, attributes his vehicle’s recent success to cutting back exposure to industrials and financials.

The fund, which returned 38.54% over three years, has approximately 2.1% in financials. This was cut from 7.6% in May 2011.

Sorensen agrees the financials sector has been somewhat volatile throughout the past 12 months. “Confidence in financials, though improved, remains shaky. Concerns about the still-fragile housing market—combined with increased government regulation—continue to hover over the sector,” he says.

Furthermore, Marsico says consumer stocks such as Amazon.com, Nike and Starbucks were key individual contributors to the fund’s 2011 performance.

Elsewhere, Bughman says while stock selection as a whole was positive, there were a few areas of underperformance in North America, specifically holdings within energy and his one holding in financials, CME Group.

Energy holdings

Marsico’s energy holdings have also hindered the performance of the fund during the past 12 months. He says oilfield services companies Halliburton and National Oilwell Varco had a challenging year.

However, the main problem has been the impact from the eurozone crisis.