With the US election now upon us investors will be weighing up possible changes to their portfolios in response.
Jason Hollands, managing director of Bestinvest by Evelyn Partners, has laid out what he sees as good options for adding exposure to the asset class.
“Many UK investors have significant exposure to US equities, which now make up almost two-thirds of the MSCI All Countries World Index,” he said.
“Given the strong gains on US equities so far this year, which has seen the S&P 500 index deliver a total return in GBP of 19.5% year-to-date, and over 28% over 12-months, many investors will have seen their exposure to the US increase significantly in recent times.
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“The performance of the US market therefore matters, but so does the impact of US policies on wider global markets. The US economy has proven remarkably resilient and it is perfectly possibility for US equities to continue to make further gains whoever secures the Presidency.”
Hollands cautioned that bond yields are higher than they were at the time of the past few US elections, and equity valuations are expensive.
“If you are bullish on US equities and believe a Trump win will spur another leg up for the market, then the simplest way to capture this is by buying a low-cost index fund like the SPDR S&P 500 UCITS ETF which has a tiny 0.03%,” Hollands said.
“But given the focus on domestic growth, another way to capture potential upside is to invest in a fund with greater exposure to small and midsize companies like the Premier Miton US Opportunities fund.”
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Hollands added that a more defensive option for US equities would be to invest via the Invesco FTSE RAFI US 1000 UCITS ETF. The latter owns the 1,000 largest companies, but instead of weighting them on market capitalisation like a traditional tracker, exposure is based on sales and cash flow book value and average total dividends over five years.
“The outcome of this approach is broad exposure to the US market but with a tilt towards companies with attractive valuations,” he noted.
“For an active and very flexible fund, we like the GQG Partners US Equity fund. It is a concentrated, high conviction portfolio of quality companies with strong competitive advantages.”
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There are 28 names in the portfolio and the fund has no sector constraints, so the portfolio varies considerably from the index. The approach is highly flexible, and the managers do not shy away from making significant calls which means relatively high turnover, Hollands added.
