GAM, Aberdeen, Prudential and Scottish Amicable funds all follow split style
US fund managers are increasingly adopting barbell strategies to combat the difficult market conditions across the Atlantic.
While normally considered the preserve of the UK income manager, barbell strategies are now starting to proliferate throughout a number of US portfolios.
As a possible US turnaround beckons, many fund managers are starting to up their weightings in more high beta growth stocks, while maintaining an overweight position in defensives as a hedge.
Rupert Howard, co-manager of the Aberdeen North American Fund, said he has moved toward a barbell strategy, anticipating the start of an economic recovery in the fourth quarter.
Howard believes the second quarter represents a trough and he is moving toward a cautiously bullish stance as he anticipates the Federal Reserve's aggressive rate cutting policy finally starting to filter down into the market.
'Our view is although the third quarter may not be any better, it will not be any worse. As we move toward the year end, we will start to see the green shoots of recovery,' he said.
Howard is overweight healthcare stocks, confident in their visibility of earnings, but is also upping his weightings in semiconductors, traditionally one of the first sectors to respond to even the slightest sign of recovery, with a handful of index stocks in between.
He said: 'We are focusing very much on stocks where there is a defensive tilt and on economically sensitive sectors that should respond first to signs of economic recovery.'
Prudential's North American Trust, managed by Richard Brody, also moved toward a barbell strategy after the group forced Brody to adapt his deep value investment style.
The group was concerned that the funds under Brody's management were being run with a tracking error in excess of 5% by last August and made adjustments to lower the tracking error.
Brody, who also manages the Scottish Amicable American Trust, agreed to invest in more index stocks, thereby increasing the exposure to tech stocks, to bring his tracking error more in line with that of his peers. Initially, management opted for a 50-50 split between value and index stocks, but that has since been eased to around 60-40 in favour of value.
The Prudential fund is currently ranked five out of 87 and five out of 81 funds over three months and one year respectively in the North American sector.
John Betteridge, director of portfolio management at Prudential, said the funds are still being run with a value bias but with broader index exposure.
James Abate, manager of GAM American Focus Hedge and the forthcoming GAM Star American Focus fund, is also running with a barbell strategy with a value bias. He said: 'We are looking at restructuring and turnaround companies at one end and sentiment turners at the other end.'
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