PSigma Asset Management says large cap stocks are likely to be the main driver of strong US equity performance in the near future.
The firm's comments come as it prepares for the launch next month of the PSigma American Growth fund, which will be run on behalf of the firm by Centre Asset Management’s James Abate.
PSigma says large cap stocks have underperformed mid cap and small cap equities but predicts that trend is coming to an end.
It says one of the main reasons for its optimism is that the housing and sub-prime crisis will likely help to lower inflation and lead to a “positive” re-rating of asset-heavy companies.
Abate says: “We see an excellent opportunity for investors in the large cap segment of the US stock market.
“We believe that, in the current environment, investors will gravitate towards companies that produce sustainable wealth creation through efficient re-investment of capital.
“These companies have not been dependent upon the excess of cheap capital during the past cycle.”
Abate adds despite the problems emerging from the housing market in the US, the economy is healthier than observers suggest.
“Despite the fall-out from the US housing and sub-prime areas, fundamentally we do not feel that a recession is imminent,” he says.
“Corporate free cash flow and debt service coverage are strong, stock valuations relative to bonds as well as other regions are attractive, and global growth will continue to aid multi-national companies.”
The PSigma American Growth fund, a concentrated portfolio consisting of 45 to 60 stocks, will run with around 60% of the capital situated in the top 20 positions.
The product, which is structured as a unit trust in line with the other products in the PSigma range, is expected to gain FSA approval next week.
It opens to investors on 8 October, with the offer period running until 19 October. Minimum investment into the fund is £1,000, with an initial charge of 5.25% and an AMC of 1.5%.
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