Rathbone Global Opportunities manager James Thomson has ramped up the fund’s US exposure to its highest level to date arguing that while valuations have increased, earnings growth is yet to come.
The fund, which aims for above average long-term capital growth, currently has a 61.44 per cent exposure to the world’s largest economy.
Mr Thomson, who at the end of last year celebrated 10 years on the fund, says: “The missing piece of the puzzle that we will see next year is proper earnings growth. The next phase will be improving capital spending and that will drive the next leg of growth in the stockmarket”.
The manager is also positive on the potential for growth among UK and European businesses.
“UK and Europe are not quite as strong a story as the US, but they are heading in the same direction,” Mr Thomson says. “The great fundamental improvements in the US will spill over into the UK and Europe.”
Like many growth-orientated managers, Mr Thomson remains sceptic about China. He admits: “My concerns lie mostly with China and the heavy reliance on expanding capacity to growth. That’s not what China needs to be doing. It needs to rebalance towards consumption so I expect further growing pains in China.”
The manager favours easy to understand, focused businesses where the growth and potential risks are easily identifiable to make up the holdings in the fund.
Currently standing at 52 holdings, he says: “It is very much growth orientated. I’m investing in undiscovered, under the radar, out-of-favour growth companies. I don’t want to own a long tail of tiny companies or ‘pet projects’.”
Mr Thomson adds: “There remains a lot of change in market share at the moment, particularly in the online retail sector. They are battling for leadership with the bricks and mortar retailers. Businesses are succeeding and failing at a much quicker pace than ever before and you can lose a lot of money in that environment. Having a good sell discipline and cutting any losses is paramount.”
At 2.82 per cent, online retailer Asos is the second-largest holding in the fund, according to the November factsheet, and is accompanied in the top 10 by others such as Amazon. Property website Rightmove is the largest holding, currently making up 3.13 per cent of the portfolio.
In five years to January 1 2014, the fund has posted gains of 129.92 per cent, compared with its IMA Global sector peer group average of 71.95 per cent and its FTSE World index benchmark return of 79.33 per cent.
Much of this performance has been driven by the manager’s exposure to large and mid-cap stocks, but he says that the fund is in no way restricted by capitalisation, sectors or geography.
Now in a new year, Mr Thomson doesn’t anticipate much change to the positioning of the fund and remains confident that the western markets – US, UK and Europe – will outshine the east.
