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Adviser Fund Index: America first

Hopeful investors are starting to look for signs of green shoots in the American econ- omy and the rhetoric of recovery is being increasingly aired among politicians and some economists.

But to what extent is positive sentiment filtering down to investors and how convinced are fund managers and the Adviser Fund Index panel about the prospect of imminent recovery in the country?

Members of the AFI panel of 18 advisory firms are maintaining a reasonable level of exposure to American equities in the conviction that the country was first into the recession and will be the first out.

James Davies, an investment research manager at Chartwell, says talk of recovery might be slightly premature but adds: “I am prepared to be wrong. One view I would subscribe to is that the US will lead the world out of this period of recession or slower growth but it can only do that with the assistance of other G20 countries such as China. They do seem to be working in tandem, which is a positive.”

He has chosen to get his American equities’ exposure though Neptune US opportunities, managed by Felix Wintle. “If the US is going to come out of recession some time this year, funds like this which are large and mid-cap with emphasis on a global thematic approach will be best placed to take advantage of it,” says Davies.

He likes Wintle’s top-down investment strategy, which sees the manager try to identify sectors that will help drag the US out of the economic mire. Davies says: “It is sectors that will be driving economic recovery rather than individual stocks. Banks, financials and housebuilders took the country into recession and although it will not necessarily be the same sectors taking us out, it will be led by these types of sectors.”

The most popular American fund across the three AFI model portfolios is BlackRock US dynamic, which features in the aggressive, balanced and cautious fund selections.

Other vehicles favoured by the AFI panel are JP Morgan US, Legg Mason US equity, M&G American, and Martin Currie North American.

American equities, as a percentage of AFI portfolios, have been steadily rising in small increments over the last few twice-yearly rebalances. Increased weightings of 1 per cent or 2 per cent at each rebalancing have ensured the asset class stays a significant proportion of the panel’s model portfolios.

David Wynn, an investment director at Bentley Jennison, says he is becoming more positive about the prospects for the US. “We like America because we think it will be the first economy to recover,” he says. “We are taking the view now that there is less bad news in the marketplace than there was. Some assets, such as high yield, are now moving discriminately, of their own volition, so we also take some comfort from that.”

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