The fund investment mainly in US mid-caps, although its investment remit can include Canadian stocks and smaller companies. It will focus on companies with a market cap of $1-10bn, although it has a limited scope to invest in unquoted stocks that will receive a stockmarket listing within the next 12 months.
The fund will be run by former Tilney fund manager Nick Roe-Ely, who was responsible for the Tilney American growth fund since launch in 1996.
Roe-Ely will take a bottom-up approach to stockpicking and will target companies that are likely to growth earnings at a faster rate than the S&P 500 index over the next three to five years. The fund will have a concentrated portfolio of 30-50 stocks and will be capped at 500m to give Roe-Ely the flexibility he needs for his high conviction growth orientated investment style.
Mid-caps were singled out for this fund because they are under researched relative to the larger companies and throw up inefficiencies which fund managers can seize upon. Compared with large caps, mid caps offer greater growth potential, are often gaining in market share and may be possible acquisition targets. Mid caps are lower risk than small caps as they have passed the critical early stage, tend to be less volatile and are more liquid.
This fund will be managed from the UK and JOHCM regards this as an advantage because it means the manager is accessible to UK investors. However, Roe-Ely will be taking a US boutique style approach to managing the fund, involving constant meetings and regular contact with the companies and taking a long term view. This long-term view means that if mid-caps grow to become large caps, this will not automatically trigger a sale.
The US has been a tough environment for fund managers recently but the economy has grown in spite of rising interest rates and high oil prices. However, there are concerns that the effects of hurricane Katrina may keep further interest rate rises at bay and the economy may start to slow as a result of high oil prices.