For a fund to perform better than a benchmark index over the long term the fund's manager needs to construct a portfolio that looks different. This is the aim of Penny Kyle, manager of the Martin Currie North American Fund. She runs a concentrated portfolio of just 38 stocks, which allows each to contribute significantly to returns, but is higher risk. We recently asked her for an update on some of her favourite stocks.
- Over the past year exposure to the healthcare sector has been increased. Penny Kyle sees the Patient Protection and Affordable Care Act, which came into effect in January 2014, as the most significant US healthcare reform in 50 years. She suggests hospitals and healthcare operators are well-placed to profit as uninsured admissions decline. She has invested in HCA, an operator of healthcare facilities, which saw a 9.4% decline in uninsured admissions in 2014. Any incremental improvement is material as it flows straight through to operating profit.
- The manager is also positive on the aerospace sector as passenger numbers soar, fuelled by an expanding middle-class and the increasing availability of low-cost travel. This is increasing demand for aircraft which should also benefit companies supplying materials and components to manufacturers. Penny Kyle has invested in Cytec, a supplier of adhesive materials. The company is experiencing strong growth which could feed through to higher profits.
- Following a decline in viewers on US network TV channels Penny Kyle has become increasingly negative on traditional media companies as advertising revenue is expected to fall. She therefore sold her investment in Twenty-First Century Fox, but invested in Twitter towards the end of 2014, which she believes is better-placed to increase advertising revenue as consumers change the way they view news and entertainment content.
Since Penny Kyle took over this fund in September 2012 it has slightly underperformed the benchmark MSCI North American Index, with growth of 59.9%* compared with 60.9% for the index. The result over the past year is similar, with the fund growing by 25.6%* compared with 26.0% for the index.
Performance of the Martin Currie North American Fund over the past year
Past performance is not a guide to the future. Source: Lipper IM* TO 01/05/2015
|Annual percentage growth|
| May 10 -
| May 11 -
| May 12 -
| May 13 -
| May 14 -
|Martin Currie North American Fund||7.7||-1.2%||17.7%||11.6%||25.6%|
|MSCI North America||8.9%||5.9%||18.7%||11.3%||26.0%|
Our view on this fund
We would like to see performance improve before considering this fund for inclusion on the Wealth 150 list of our favourite funds across the major sectors. The size and importance of the US stock market globally makes it difficult to find an edge over other investors and outperform. For exposure to larger US companies a low-cost passively managed fund could be considered.
Investors should note that following Legg Mason's acquisition of Martin Currie in 2014 the name of this fund will change to the Legg Mason IF Martin Currie North American Fund with effect from 26 June 2015. We do not anticipate any other changes at the current time.