'Trump or Clinton? We're more worried about interest rates’
ALTHOUGH Donald Trump’s past sexual shenanigans have gripped America – and the UK – US fund manager Garrett Fish admits he is somewhat nonplussed about the revelations.
‘The presidential election will be a close run thing,’ he says, talking from New York, where he manages the JPMorgan American Investment Trust.
‘A bit like the Brexit vote was in the UK. It would be better if 320million people had more qualified candidates. The verbal sparring is not pretty, but we are where we are. In less than four weeks’ time, on November 8, we will know the outcome.
‘From a portfolio viewpoint, I’m not betting on who ends up in the White House, Trump or Hillary Clinton. I’m more concerned about other key issues gripping the economy, such as the future course of interest rates and where the American economy goes from here. There’s a general feeling of negativity, which is disconcerting.’
Fish runs the fund with Eytan Shapiro. Fish manages holdings in large companies – essentially those listed on the S&P500 Index of America’s biggest firms, while Shapiro is responsible for the trust’s smaller company holdings.
Currently, the trust’s 77 larger company holdings account for 95 per cent of the portfolio. Some 120 smaller company stakes make up the other five per cent. The trust’s individual positions in Apple and Microsoft are bigger than its entire exposure to smaller firms.
‘The smaller company exposure has fluctuated between three and seven per cent,’ says Fish. ‘We invest in this area because it adds to the trust’s performance while reducing investment risk. It’s key.’
The holdings in Apple and Microsoft are indicative of the trust’s technological bent – other big holdings include Qualcomm, Hewlett Packard and Oracle. Fish says technology companies offer the best value and greatest growth prospects in an economy that at best is grinding along.
This tech bias is complemented by more defensive positions in consumer staple stocks, which are less sensitive to economic fragility – such as Pepsi, cigarette maker Philip Morris and the giant Tyson Foods. In contrast, the trust is underweight in automotive stocks and financials.
In terms of absolute numbers, the trust’s record cannot be faulted. Investors have enjoyed one-year returns of 32 per cent, buoyed in part by the strength of the dollar against the pound. But Fish is cautious, acknowledging the fact that there is a current disconnect between many company valuations and the flat revenue growth they are generating. ‘Market pull-backs are important,’ he says. ‘Do I expect one? Yes. It could happen in the wake of the presidential elections, it might happen later. They’re important and as a fund manager you just have to deal with them.’
Like all US fund managers, Fish finds outperforming the S&P500 a challenge. According to data from fund scrutineer Morningstar, the trust underperformed the index last year and has done so this year as well. This follows outperformance in both 2013 and 2014.
Fish says all he can do is stay true to his investment principles and continue to invest in companies that he feels represent a combination of good value and growth prospects.
Despite the short-term wobbles, the approach pays off long term. Morningstar says that over the past ten years, the trust has delivered a return equivalent to 11.54 per cent a year. Over the same period, the S&P500 has returned 11.41 per cent a year.