Rathbones’ global equity manager James Thomson is maintaining a US weighting of almost 60 per cent in the belief a rate hike will not negatively impact stocks.
Mr Thomson held 65 per cent of his Global Opportunities fund in the US earlier this year and is remaining overweight the region despite a lacklustre 2015 for the country’s stock market thus far.
As of 15 August the S&P 500 had returned 1.4% year to date, well below recent years’ returns, as investors face up to a potential interest rate hike by the US Federal Reserve - now widely predicted to take place in either September or December.
The Rathbones manager, however, said such a move has now been priced in to the market.
“I do not think [a hike] is a reason to change the positioning of the fund, because stocks typically cycle higher within a year of a rate rise. I don’t think its enough of a surprise to investors to make material adjustments…this is still one of the largest weightings the fund has ever had. I’m bullish on the economic prospects but also on innovation,” he said.
Mr Thomson is looking to add more US and European names to his growth-orientated portfolio. He has no emerging market exposure as he fears the economic outlook is “not aligned with durable, sustainable prospects”.
Despite these intentions, the manager said success in this year’s markets has been defined by stock-picking rather than regional allocations.
“If you have been focussed on countries this year I do not think you will have added much value. The key thing for us has been stock-picking,” he said.
“When you look at performance, [country allocations have] not made that much of a difference. On the face of it European stocks have done very well but the weak euro has brought down returns, while in the US it has been flat.”
Avoiding certain stocks has provided a particular boost to the fund, Mr Thomson said, as commodity prices continue to slump. Instead, the £549.8m fund is overweight technology stocks such as Facebook and Amazon, as well as healthcare and consumer firms.
In the year to 14 August the fund has returned 21.7 per cent, compared with an 8 per cent rise for the IA Global Sector. Over three years it has returned 54.8 per cent, compared with a 37 per cent rise for the sector, while over five years the fund has returned 92 per cent compared with a sector average return of 55.5 per cent.
Mr Thomson said a strict sell discipline has helped ensure underperformers do not detract too greatly from performance.
“There have been a number of things that have not done well but I look at all the within the portfolio and none reduced performance by more than 0.5 per cent,” the manager said.
Companies that have had a negative impact on returns include jeweller Tiffany & Co, and Deckers Outdoor, the manufacturer of Ugg Boots, he added.
