FE Alpha Manager Wintle: Why I’m bullish on the US housing market
Neptune’s US equities team is betting on a resurgence in the sector to drive growth in the world’s leading economy.
By Jenna Voigt, Features Editor
Sunday October 28, 2012
Investors have been wary of the US housing market after the sector plunged the country into chaos in 2008, but FE Alpha Manager Felix Wintle
says the sector is making a comeback.
Wintle, head of US Equities at Neptune, says there is a pent up demand for housing in the country, as “echo boomers” or people born between 1977 and 1990 are looking to settle down.
The manager says housing starts are at an all-time low and estimates 2.3 million people are looking to buy their first home.
"We are seeing a recovery of the housing market," he commented. "We’re more confident about the future of the US. There is a real benefit in terms of population increasing over time."
He says that the indirect benefit of an upswing in the housing market is a wealth effect whereby consumers are bolstered by the increasing value of their largest asset and therefore feel more confident in discretionary and consumer spending areas.
He is also looking to increase his exposure to financials as he believes banks will increase lending to new entrants into the mortgage space.
James Dowey, chief economist at Neptune, adds that the US housing market is now a contributor to growth for the first time since the sector plunged the market into chaos in 2008.
However, he believes there are still risks to factor in, especially as no real decisions will be made in the political space until after the upcoming presidential election.
"We’re still in the post-crisis deleveraging process and there’s a drag on growth in that," Dowey said.
The economist says the impending fiscal cliff at the end of the year is a concern, but that investors cannot afford to stay out of the market and miss gains in the growing US economy.
"If you look at the cold, hard numbers, a bit too much is made about the fiscal cliff right now," he continue.
"It is going to be ugly and we’re not going to get any decisions until after the elections, but that’s our philosophy."
The £400.3m Neptune US Opportunities
fund, headed by Wintle, is a top-quartile performer over the five-year period, returning 30.42 per cent compared with an IMA North America sector average of 22.24 per cent.
It has also outperformed its benchmark, the S&P 500, during this time.
However, it has sharply underperformed over three years, returning roughly half the sector and benchmark averages over the term.
Performance of fund vs sector and index over 5-yrs
Source: FE Analytics
The fund has a minimum investment of £1,000 and an annual management charge of 1.6 per cent. Its TER is 1.68 per cent.
Graham Duce, co-head of multi-manager funds at Aberdeen, said there is evidence the US housing market is recovering.
"It does seem as though there are some signs of life," he commented.
"The affordability of owning property in the US has never been so good. I would concur with many of the statements Felix [Wintle] is saying from a top-down perspective."