The Artemis US equity team, headed by Cormac Weldon, recently launched three US focused funds. He has now, along with Stephen Moore, launched the fourth and fifth funds in Artemis' new US range. Further information on the team, their process and the three funds already launched, is available in my recent article.
The fund will focus on higher risk small and medium sized companies within the US. The manager plans on running a fairly concentrated portfolio of 50-70 stocks which allows each stock to make a significant contribution to performance, but is higher risk.
The fund aims to achieve a positive return over any three year period. The manager will employ a strategy of investing in shares he believes will rise in value over time (referred to as 'long' investing). Importantly, he will also look to profit from shares he believes will fall in value (referred to as 'shorting'). If the latter strategy proves positive, it could help reduce volatility. However, this is a higher-risk strategy which relies on the fund manager making the right calls. If he gets it wrong he could lose money even in a rising market.
The fund will generally have a net exposure (percentage of long positions minus the percentage of short positions) of 15% and a gross exposure (percentage of long positions plus the percentage of short positions) of 130%.
Key to both long and short stock selection is that a risk is only worth taking if the potential reward significantly exceeds the potential loss. For every unit of downside risk, the team looks for a stock that has at least twice the upside potential. This threshold is not a hard and fast rule, but one the team looks to achieve.
Please also note the US Absolute Return fund carries a performance fee of 20% on any outperformance of the fund's benchmark (S&P 500) on an annual basis. Further details of which can be found in the Key Investor Information Document and fund prospectus.
Our view on these funds
The US is a difficult sector for a fund manager to add value. Stocks tend to be highly researched, making it difficult for managers to uncover opportunities others have overlooked. Our analysis suggests the US market looks expensive relative to its longer term average, which will make it harder for the managers to identify undervalued stocks. However, as part of a balanced, long term investment strategy, investors may consider some exposure to US stock markets.
At present, these funds will not be added to the Wealth 150 list of our favourite funds across the major sectors, though we will monitor their progress.