How to cash in on a US recovery
FE Trustnet looks at one of the options available to proponents of an election-year revival.
The Jupiter North American Income
fund offers the chance to gain from the relative strength in the US economy using a strategy more common in the UK – that of focusing on dividends.
Yields in IMA North America are comparatively low, but the fund, managed by Sebastian Radcliffe
since 2001, has the fourth-highest in its sector with a one-year figure of 1.7 per cent, according to data from FE Analytics
The £361m portfolio was previously known as the Jupiter North American fund. Following US tax breaks for dividends, however, it was reconstructed in May 2007 to provide investors with the option for an income stream.
Patrick Connolly, head of communications at AWD Chase de Vere, said: "The name ‘income fund’ is slightly deceptive as its yield is quite low. But in the US it’s extremely difficult to find managers who can consistently outperform the sector, so we do use the fund even though it may not be considered a standout income generator."
Jupiter North American Income focuses on blue chip companies in the US, a potentially attractive strategy given the strong performance of the US economy compared with its peers in the developed world. Estimated GDP growth of three per cent in the fourth quarter last year added to hopes the country will lead the world out of recession.
In March FE Trustnet
reported on research from the Association of Investment Companies (AIC) that suggested the US has more than doubled in popularity
among investors since September 2011.
The body said 14 per cent of active investors considered it the most attractive regional sector, compared with just six per cent last year.
However, mediocre figures on home sales and employment growth last week raised doubts about whether the country was experiencing a stable recovery.
Connolly says that the longer-term outlook still makes the US attractive.
"We would always want US exposure in a balanced portfolio. We are slightly overweight US equities. There will be volatility and ups and downs, but overall we are positive in the longer run."
Performance of fund vs sector over 5-yrs
Source: FE Analytics
Jupiter North American Income has returned 36.93 per cent over the past five years, compared with 15.45 per cent from its S&P 500 benchmark. The fund has also beaten the index over the last decade, but has underperformed
over three years, with the S&P boosted by the 2009 rally.
It is the least volatile fund in the sector, with a score of of 15.92 per cent compared with IMA North America’s 17.41 per cent.
Telecoms, healthcare and service stocks remain the most favoured in the fund, with healthcare service provider CVS Caremark appearing in the top-10 this quarter alongside IBM, energy firm Chevron and media giant Comcast.
Investors can gain access with a minimum investment of only £500, and the fund’s total expense ratio (TER) is 1.81 per cent.