Smith & Williamson Investment Management’s MPS remains underweight the US equity market on the basis that it sees better opportunities in other markets like the UK.
The MPS team went underweight the US equity market earlier in 2021, with James Burns, co-manager of the Smith & Williamson MPS, saying the move has yet to pay off with the US continuing to drive global markets despite challenging valuations.
“We moved underweight US at the start of the year and while it hasn’t worked yet, our strategy team’s view is that it is better to look outside the US for equity exposure,” he says.
“We’re unlikely to cut our current underweight any further but we are expecting at some point to see a degree of rotation out of the US into the areas we are overweight. But we continue to have significant exposure to the US and are very happy with the funds we own.”
The MPS team holds a select number of US focused funds, including key position Artemis US Extended Alpha.
“Artemis US Extended Alpha forms one of our core positions and has been held in the portfolios for a number of years,” says Burns. “The fund is not as high profile as some, but we think the fund manager William Warren is fantastic.
“As the fund has a 130-30 structure, it can short stocks, and it does. This is one of the reasons for holding it in the portfolio, as we believe the ability to short will be very helpful in the US. There are fewer opportunities to do that at the moment – the managers are careful about stocks they think are overvalued but are potentially going to be ramped up by the market – but we like the fact that if we have to have US exposure, it is attractive to hold a fund that can perform well in both up and down markets.”
Alongside the Artemis US Extended Alpha Fund, the team holds passive US exposure through Vanguard US Equity Index, as well as active growth exposure through Monks Investment Trust.
“We added Monks Investment Trust to the top two models of the MPS in the August rebalance,” says Burns. “The trust is not solely invested in the US but has a 55% exposure to the market, primarily focusing on the areas we think future growth is going to come from. Holding this trust within the portfolio has been advantageous in order to counter the large value tilt we have elsewhere.”