Siddles (pictured), who has more than 25 years’ experience in the market, rose to prominence running both an open and closed US small cap fund at F&C. He ran F&C US Smaller Companies fund between January 2001 and October last year and launched his new product earlier this week.
He still manages the closed-ended fund, though its name has changed to the Jupiter US Smaller Companies Investment Trust
According to FE Analytics, during his time as manager of the fund it was the second best performing fund in the IMA North American Smaller Companies sector with returns of 154.68 per cent, beating the sector average by more than 60 percentage points.
Our data for his investment trust only spans back to December 2002, but since then the Jupiter US Smaller Companies trust has returned 290.95 per cent while its benchmark – the Russell 2000 index – has returned 191.84 per cent.
Performance of trust vs sector and index since Dec 2002
Source: FE Analytics
While US smaller companies are not an area of the market that have gained a lot of traction with UK investors, Rob Morgan – pensions and investments analyst at Charles Stanley Direct – says investors should keep a close eye on the performance of Siddles’ new fund.
“Jupiter has a good history of bringing in good quality managers,” he said. “I will be watching this fund with interest as he has a good track record.”
“There is a genuine lack of quality US equity managers that are based here in the UK and so this could be quite a welcome fund launch.”
Gavin Haynes (pictured), managing director at Whitechurch, is also a fan of Siddles and had used the manager’s F&C fund, which is now run by Nish Patel, for a number of years within his higher-risk client portfolios.
“He is a manager we hold in high regard. He is obviously operating in a very specialist space and it is one of the only offerings in the US smaller companies sector for UK retail investors, but his F&C fund was the stand out performer,” Haynes said. “Admittedly, we did sell the fund following the news that he was leaving.”
Following Haynes and his team’s decision to sell the F&C fund, they now use the Legg Masson Capital Management Opportunity fund – which is overseen by legendary investor Bill Miller – as it gives them direct exposure to the recovering US economy.
Since its launch in February 2009, Legg Mason Capital Management Opportunity has been the best performing fund in the IMA North America sector with returns of 178.22 per cent. Its benchmark, the S&P 500, has returned 113.12 per cent, over that time.
Performance of fund vs sector and index since Feb 2009
Source: FE Analytics
The majority of experts agree that the US is in a much stronger economic position than other developed markets having emerging from the depths of the financial crises far more quickly than the likes of the UK or continental Europe.
Many also expect the US to be the leading light in the global economy over the coming years as growth is anticipated to continue to slow in emerging markets such as China.
Therefore Haynes says buying the Jupiter US Small and Mid-Cap Companies fund now would be another good way to access that growth.
“If you are looking to exploit the recovery US economy, small caps are a good place to be instead of large globally focused businesses.”
“At the moment, we are focusing on the US domestic growth story but we are using the Legg Mason Capital Management Opportunity fund as he holds the likes of housebuilders and airlines.”
“However, I think Robert Siddles’ new fund would also be good for that sort of exposure.”
Siddles also agrees that the outlook for US smaller companies now looks very attractive.
“When I started my career back in the 1980s, it was all about Japanese equities, that was the place to be.”
“In the 1990s it was European equities and last decade it was all about China and the BRICS. However, this decade I think it is going to be America,” Siddles said.
“I view US smaller companies as a new emerging market and I’m therefore optimistic about the future. Firstly, I think the fundamentals for America are really quite strong compared to the countries.”
Siddles says there are three reasons why the US will be the leading light in the global economy.
Firstly, he points to its large shale reserves which is causing the chemical industry to move back to the states, its young population and because its manufacturing costs are becoming more competitive.
Performance of Russell 2000 over 2yrs
Source: FE Analytics
Given that it is a part of the market which has performed well over recent years, Newton’s James Harries recently warned FE Trustnet that starting valuations in the US were too high to signal the start of a new decade long-bull in equities.
However, Siddles thinks US small and mid-caps can continue to be expensive.
“Valuation has been flagged up by a number of commentators as being high, but I think that is bit of a red herring,” Siddles said. “I think markets with good fundamentals are always pricy and will remain pricy.”
“Finally, I think if you are going to invest with an active manager, then that is really half the story in US mid and small cap, because they are paradise for active managers where it is easier, almost, to add value.”
Under Siddles’ stewardship, the F&C US Smaller Companies fund was the second best performer in terms of its alpha generation relative to its benchmark and its information ratio.
While the manager is a long-term bull on the asset class, he is also keen to preserve his investors’ capital.
His portfolio is spilt between companies that offer core long term growth and recovery stocks which he will only hold on a two to three year view.
For a company to make it into his fund, Siddles ensures that they have a clear edge over their competition, they are using their free cash flow appropriately, the management has a significant amount of equity, they aren’t dominated by one or two large customers and that the valuation is inexpensive.
That process helped his F&C fund to outperform the sector and is benchmark in the falling markets of 2008 and 2011, for instance.
Jupiter US Small and Mid Cap Companies’ clean share class has an estimated ongoing charges figure (OCF) of 1.13 per cent.
