Technology and cyclicals bolster US equity funds

Alison Cratchley, lead analyst, said growth vehicles such as the WP Stewart Holdings fund had outperformed, particularly those that had bought into the information technology sector.

IT stocks were 4.3 per cent up for the quarter against a 6.2 per cent fall in the S&P 500 Citigroup Growth index and a 16.1 per cent drop in S&P 500/Citigroup Value.

Other portfolios, such as the DWS Invest US Equities fund, had outperformed due to "a well-timed move into cyclicals", the lead analyst said.

The teams at both DWS and WP Stewart added there was further cause for optimism, predicting the market would be a higher in a year's time.

As a result, DWS is fully invested and has moved into cyclical positions such as consumer discretionary, as well as diversified global plays such as technology. It is also looking at corporate restructuring opportunities.

WP Stewart has continued its focus on growing, high-quality businesses.

According to S&P, the average earnings growth of its Holdings fund is zero for this year compared with a 20 per cent fall for the index. It also initiated a position in IT firm Google.

Other portfolios with technology overweights included the MFS Meridian US Value fund, which has maintained its weighting in the sector for a number of quarters, and the Jupiter North American fund, which held Microsoft, Oracle, Applied Materials, Corning and Cisco.

Cratchley argued an increasing focus on fundamentals would make good stock selection all the more important. Continuing volatility would also increase portfolio turnover, she added.

For instance, the teams managing the Calamos Growth and Delaware US Large-Cap Growth Equity funds said they had been selling down holdings earlier than usual, although the Calamos Growth fund had still been concentrated in firms with "strong balance sheets, sustainable earnings growth and diversified global revenues".