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A blurring of styles

The US equity arena has been the graveyard of many an aspiring fund manager. It is notoriously difficult to outperform the US equity market consistently – a fact to which many UK-based US equity managers can testify. The resulting shortage of supply often tempts US-based houses to come over to the UK to try and fill the gap.

When they do, one thing we are particularly keen to gauge is their level of commitment to the UK market. Are they prepared to dedicate the sales and marketing resources needed to really develop a UK client base?

As a fund of fund investor and professional fund selector, this creates a tension. One is keen to spot up-and-coming funds early but it can be a difficult balancing act as we have to combine the desire to find talented managers with the requirements of running a significant amount of money. We do not have set limits in terms of fund sizes and the proportion we will own but it is something that we are very conscious of.

One theme that I have noticed while meeting these US managers has been the increasing blurring of growth and value in many portfolios.

The US mutual fund industry is much more well-defined than the UK one, in that every fund is typically classified into a Morningstar box by style (value, core or growth) and market cap. In the UK, however, funds tend to move around more over time in terms of style and exposure.

In contrast, US managers have historically been perfectly happy to define themselves as either a growth or a value investor. However, the managers we have seen recently, despite being largely value investors by name, are talking increasingly about growth stocks coming into their portfolios or on to their radar screens.

The compression of valuations that we have seen over recent years has widened the opportunity set for traditional value managers and has illustrated the fact that value and growth investment styles are no longer mutually exclusive.

Bill McQuaker is director of multi-manager at Henderson Global Investor


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