Fidelity AMERICAN's latest manager Fergus shiel has cut positionS and put cash into equities
Fergus Shiel has transformed the £1.25bn Fidelity American into a more mainstream US equity fund, slashing the number of positions and taking off its heavy gold and cash bets.
Shiel, who took over running the portfolio earlier this year, from John Muresianu, does not believe there will be a double-dip recession in the US, particularly as job losses have not been high and liquidity is plentiful.
He has built positions in financials, which have begun to bounce back, and tobacco, two sectors Muresianu had avoided.
Shiel said: 'When I took over, the fund had a heavy position in gold and energy and it had a relatively high cash position which came out of fund flows into the fund and the previous manager feeling that he did not have a place to put that. It was positioned pretty defensively.
'As of the end of September there were a lot more financials in there. Prior to my taking over the fund there weren't any financials in there. The gold positioning has come down as has the cash position.
'As for the energy position, I would say that the holdings have been switched over to favour energy service companies as opposed to straight exploration and production companies.'
Shiel said his investment process is both similar and different to Muresianu's. He added: 'We are both prepared to take significant positions. That is to say I don't think either of us looks at benchmarks to drive positions.
'There are a lot of managers that try to be 100 basis points over their healthcare weighting and finance it with a similar underweighting in financials, for example.
'John's portfolio was quite concentrated and I tend to run portfolios like that as well. The largest fund I run in the US is the Independence Fund and it too has large concentrations. It had almost 30% in tobacco stocks at one point this year.'
One striking example he gives is his weighting in Philip Morris. Shiel, who has built a position in tobacco in Fidelity American, said: 'At one stage I had around 7% or 8% in Philip Morris. It grew to close to 20% through appreciation. The same thing happened with RJ Reynolds which in the Independence fund has been around 10% at times, having appreciated from a small position.'
In the Fidelity American fund such large positions are not, however, allowed under its mandate. Individual holdings in the fund are capped at 10%.
Muresianu was also known for running a large number of stocks, even though his sector and investment theme bets could be highly concentrated. At times, the number of holdings touched 400. It has been cut back to just over 142 but Shiel is looking to cut that back to closer to 100. Shiel said: 'My belief is that there are only so many good ideas in the world at any time. If you think you have found one or a few of them you need to apply your capital accordingly. My belief on long portfolio tails is that if you have a lot of small positions you probably won't know them as well or be as focused on them as on a large position. There's much more chance of them blowing up. You don't have enough time to chase down each of the minute positions that blow up and yet they can impact your portfolio badly.'
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