MITON US OPPORTUNITIES: Full speed ahead as U.S. fund leaves S&P 500 in its wake
Most people are encouraged to invest in the US through a low-cost fund that tracks the stock market. This is because few actively managed US portfolios beat the market.
But Miton US Opportunities is one of the exceptions. Since launch in early 2013, it has outperformed the S&P 500 Index, the main measure of the US market. No mean achievement.
The fund is run by Nick Ford and Hugh Grieves, who both have more than 20 years’ experience running equity funds. They previously worked together at Gartmore, a now defunct asset manager, running US funds with a focus on smaller companies.
On board: Miton US Opportunities is run by Nick Ford (right) and Hugh Grieves, who both have more than 20 years’ experience running equity funds
Their ability to outperform stems from a mix of experience, meticulous research and a willingness to scour the market for investment opportunities.
Though their starting base is the 3,000 firms that make up the Russell 3000 Index, which represents 98 per cent of the US equity market by value, they whittle down their universe to 1,100 stocks by eliminating those below a certain size and which operate in industries that fail their ‘quality’ criteria.
A series of qualitative and quantitative checks then boils the number of possible investments down to 400, from which they select their holdings.
It results in a portfolio that is devoid of many of the iconic US brands such as Apple and Amazon. Instead, its top holdings include Vantiv, America’s biggest payment processor, and Eagle Materials, a buildings materials company based in Dallas.
Trading trends: Grieves and Ford invested in cruise firm Royal Caribbean and say demand is booming
Though the resulting 41-strong portfolio is full of unfamiliar names, the holdings have common characteristics – they are cash-generative businesses with strong balance sheets and sustainable franchises.
‘We are looking all the time for the best ideas in a big pond,’ says Ford. ‘We like firms that have a dominant market position and over time can grow their share.’
One familiar name in its portfolio is cruise company Royal Caribbean. ‘The industry is in great health,’ says Grieves.
‘Demand in Europe and the US is booming, while China is an exciting new market. There are not enough ships to fulfil demand and the companies are all generating lots of cash. Royal Caribbean stands out because of the quality of its management.’
Grieves insists the duo’s approach is less risky than buying a fund tracking the performance of the S&P 500.
‘The businesses we are invested in have lots of cash and possess resilient balance sheets,’ he says. ‘This builds in a margin of safety.’
As expected of individuals who make a living from investing in America, they are not among those who believe the market is heading for a fall. Ford says: ‘We argue against the idea that the US equity market is in a bubble.
‘Yes, the S&P 500 is high, but the firms in the index are far more profitable and cash-generative than ever. When people lose money investing in America, it is usually because their view is too short-term. Robust earnings growth and a stronger US dollar gives UK investors a positive background for investing.’
Despite its strong record, the fund does not make it into investment broker Hargreaves Lansdown’s list of top investment funds. Nor does it get an ‘elite’ rating from scrutineer FundCalibre.
US funds that do include Axa Framlington American Growth, Brown Advisory US Flexible Equity and Lazard US Equity Concentrated.
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