R&M World Recovery, GAM Global Diversified and JO Hambro Global Opportunities are among some of the top-rated global equity funds with the least exposure to the US, according to data from FE Analytics.
This comes following a general market consensus that US equities will rally as a result of president Donald Trump’s plans for fiscal loosening, which could bolster the country’s economy and therefore the health of US companies.
However, a number of industry commentators are concerned that US equities have already performed well over the years and, if an increasing number of investors pile into the market area, it could have further to fall if market sentiment proves misguided.
Performance of indices over 10yrs
Source: FE Analytics
In an article published last week, Premier’s Simon Evan-Cook told FE Trustnet he operates an “America last” policy when it comes to portfolio construction, given the market’s maturity and toppy valuations.
“The big [judge of market maturity] for us is the 10-year cyclical P/E ratio which looks at the average earnings over 10 years, so it therefore gives you a more tortoise-like appreciation of where you are. It has only been more expensive on that basis in 1999 and 1929,” he warned.
“It is now more expensive than it was in 2007 before the financial crisis which, to us, is a big reason not to be in it.”
For those who are concerned about a potential fall from grace when it comes to US equities, or who are positive on the US but are looking to dovetail their exposure, we have looked at the highly-rated global equity funds with little US exposure relative to the MSCI World index.
While the index currently has a 59.89 per cent US weighting, a total of 13 funds in the IA Global sector hold less than 50 per cent in the US and have been awarded four FE crowns or more by our research team. This doesn’t include sector-specific funds or investment vehicles that are available to institutional investors only. 
One of the most well-known names on the list is Lindsell Train Global Equity, which currently has a 34.6 per cent US weighting.
Headed up by Michael Lindsell, James Bullock and FE Alpha Manager Nick Train (pictured), the £2bn fund aims to provide long-term growth through a highly concentrated portfolio of between 20 and 35 stocks.
Its largest regional weighting is in fact the US, but it also holds significant weightings in the UK at 27.2 per cent, Japan at 24.7 per cent and continental Europe at 12.9 per cent.
Over five years, the five crown-rated fund has returned 136.33 per cent compared to its average peer’s return of 73.01 per cent. It also has a top quartile maximum drawdown (which measures the most money lost if bought and sold at the worst possible times) and Sharpe ratio (which measures risk-adjusted returns) over the same time frame.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
With a slightly higher US weighting than Lindsell Train Global Equity at 41.4 per cent, Peter Saacke’s Artemis Global Growth fund has been awarded a four crown rating by the FE Research team.
As with most Artemis funds, it adopts the SmartGARP system to analyse stocks which focuses on six key factors: growth, value, estimate revision, momentum, top down and fund manager sentiment.
This has led to a highly diversified portfolio of between 140 and 200 stocks at any one time; as well as holding approximately 40 per cent in US equities, it has 21.4 per cent in emerging markets, 22.8 per cent in Europe and much smaller weightings in the UK, Asia Pacific and Japan.
Over five years, the £630m fund has returned 120.12 per cent and is in the top quartile for its Sharpe ratio and in the second quartile for its maximum drawdown and annualised volatility.
A five highly-rated fund with even less exposure to US equities at 32.28 per cent is JOHCM Global Opportunities, which is managed by FE Alpha Manager Ben Leyland and has five FE crowns.
The £306m fund has a concentrated portfolio of 31 holdings and has a distinctive focus on achieving an above-average risk-adjusted total return. To do this, the team focuses on valuations, long-term return expectations and cash flow generation.
While it currently has a cash weighting of 19.6 per cent, it has a 20.7 per cent weighting in Europe, 12.4 per cent in the UK and 12.1 per cent in Japan.
Not only has the fund comfortably outperformed its sector average and benchmark since its launch in June 2012, it also has a top-quartile annualised volatility, Sharpe ratio, maximum drawdown and downside risk (which predicts a fund’s susceptibility to lose money during falling markets).
However, its high cash weighting has dragged on performance over recent months and it has fallen into the bottom quartile over one, three and six months.
With an even lower US weighting of just 20.2 per cent, GAM Global Diversified has the second-lowest weighting out of all of the global equity funds on the list.
Headed up by FE Alpha Manager Andrew C. Green since 1984, the five crown-rated fund is in the top quartile for its five-year total return of 98.57 per cent. However, it is in the bottom quartile for its returns over three years following a challenging 2014 when it lost 0.16 per cent.
The manager looks for oversold areas of the market that have a catalyst for change and is significantly overweight financials and materials relative to its benchmark.
However, the highly-rated global equity fund with the lowest exposure to US equities at just 9.67 per cent is R&M World Recovery which, as its name suggests, invests in stocks undergoing restructuring and recovery following lacklustre periods of performance.
As with other R&M funds, it adopts the team’s MoneyPenny automated stock selection system as part of its process.
Since its launch in 2013, the five crown-rated fund - which is managed by Hugh Sergeant - has returned 96.07 per cent compared to its sector average’s return of 50.58 per cent and its benchmark’s return of 61.24 per cent.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
However, this fund is not for the faint-hearted as, over the same time frame, it has a bottom-quartile maximum drawdown of 18.68 per cent as well as a bottom-quartile annualised volatility and downside risk.
The research team at Square Mile, which has awarded the fund an ‘A’ rating, said: “Investors need either an iron constitution or to recognise that a little may go a long way.
“We have a high regard for Mr Sergeant who has been investing in recovery type stocks throughout his career and he has built an enviable performance record running UK portfolios in a similar fashion. However, this is a high risk, high return strategy that really needs to be considered over the long term.”
Other funds with low US equity weightings that deserve an honourable mention include Fidelity Wealthbuilder, Schroder Global Equity Income, and the passive Vanguard LifeStrategy 100% Equity.