By Robert Stock Threadneedle is looking at the possibility of launching a stable of themed funds as...
By Robert Stock
Threadneedle is looking at the possibility of launching a stable of themed funds as interest grows in sector investing.
Sarah Arkle, head of equities and managed funds at Threadneedle, showed IFAs gathered at Threadneedle's annual investment conference at Brocket Hall evidence of the growing importance of sector as opposed to regional asset allocation.
It showed that IT hardware, pharmaceuticals and banks now have a greater share of global market capitalisation than the UK, which is only just slightly larger than the global telecommunications and software sectors.
The US is just under 50% of total global market capitalisation according to the MSCI Global Index, but individual stocks such as General Electric, Cisco Systems, Microsoft, Exxon Mobil, Intel and Pfizer are all individually larger than either Spain, Sweden or Italy.
On the back of this research Simon Davies, chief executive and chief investment officer at Threadneedle asked the IFA audience at the Hertfordshire country house whether it would like Threadneedle to move to managing assets on a sector basis and away from its current regional bottom-up, stockpicking approach with sector overlay.
While only 39.6% agreed that a complete move would be favoured, there was a general positive reaction to Davies' announcement that Threadneedle was investigating launching a series of themes funds, possibly with a fund of themed funds, offering additional asset allocation management.
Spelling out Threadneedle's own current asset allocation strategy, Arkle told IFAs that the group is currently overweight in technology in the US although this is highly selective and not reflected in overweights in other geographical areas.
In other regions Threadneedle has neutralised its technology position reflecting the speed with which the market is punishing earnings downgrades.
She said Threadneedle is also overweight in oils, media and pharmaceuticals, neutral in financials, utilities and consumer staples and underweight in industrials, IT hardware and telecoms.
Geographical asset allocation is focusing on a reduced overweight in the US, a marginal overweight in Europe, underweight in Japan, neutral in Asia as well as overweights in UK and Asia.
Arkle said that that the next 12 months would offer lower returns on equity than in the previous 12 months, but that following recent falls in stock markets valuations are looking more reasonable.
Arkle said: "The equity risk premiums are looking a lot more attractive than last year. But if earnings and the world economy does slow down faster then people expect, the scenario is not so attractive."
In Europe Darrell O'Dea, manager of the frAAA-rated European Select Growth Fund, said that he had adopted a cautious stance in his portfolio.
He is overweight in media, general growth companies and oil, neutral in pharmaceuticals, financials and industrial cyclicals and basic industries, and underweight in food manufacturers, telecoms and technology.
US fund manager Cormac Weldon said that the US growth story remains intact and that the market was now trading at the lower end of fair value.
Weldon said that Threadneedle was overweight technology and energy, reflecting scarcity of natural gas supply, as well as utilities and biotechnology in the small-cap arena. It is underweight in consumer cyclicals, consumer staples and industrials in its US portfolio.
Threadneedle American Growth has an frAA rating and is ranked six out of 79 in its sector over three years.
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