One of the big issues that the great US bull run has thrown up is the poor reflexes of some of the big name US fund managers. The managers of ‘offshore’ domiciled funds investing in the US have also produced mixed results, as Micropal’s sector average return shows.
At this point in the market cycle, international investors looking for increased US exposure need to be aware that stock selection and timing are crucial. Kurt Fuyerman, manager of the Morgan Stanley US Equity Growth Sicav, believes now is a classic stock pickers’ market. He considers there is good money to be made in ‘unsafe growth’ ie, stock of companies which have strong fundamentals but where investors have doubts. He divides these into two types: stocks infected with fears stemming from the Asian crisis and those that should be insulated against the negative factors pressuring US corporate profits.
Because a number of funds investing in the US have specific processes to follow, be it smaller companies or special situations, the investment restrictions on the manager must be taken into account to ensure the investor gets the exposure expected. A good example in recent times has been the advance of the big technology stocks. Market cap restrictions on managers of special situations funds will have prevented them from profiting fully from this trend.