Product review: Artemis US equity funds

The US Smaller Companies Fund, managed by Cormac Weldon, utilises an equity long-only strategy. As a high conviction fund, Mr Weldon is free to choose stocks in whichever areas of the market he sees opportunity. Therefore, the fund will typically aim to bear little relation to the Russell 2000 benchmark index.

There is a 0.75 per cent management fee and a 1 per cent ongoing charge, including additional expenses capped at 0.25 per cent. The portfolio is made up of 50-70 stocks with a small and mid-cap bias, targeting stocks with a market value of under $10 billion USD.

Stephen Moore manages the US Absolute Return Fund with a long-short equity strategy and benchmark of 3 month London Interbank Offered Rate (LIBOR) in the currency of the applicable share class. The fund takes a risk-conscious approach by forecasting the share movement of each company within the portfolio for the upcoming year.

The management fee is 0.75 per cent with an estimated ongoing charge of 1 per cent, including additional expenses capped at 0.25 per cent, as well as a 20 per cent high-water mark applied performance fee. The portfolio contains 40-70 long positions and 50-95 short positions with expected volatility of 4-12 per cent.

Comment:

Both funds have the same top-down analysis approach, meaning that they look at the big picture first before examining smaller details, and bottom- up research, in that they do not emphasise market cycles and instead examine stocks individually.

Smaller companies offer investors the potential to get in early on an innovative and often fast-growing investment. This is particularly so in the US market with its robust supply of smaller companies. Academic studies have cited the ‘smaller companies effect’, which suggests that smaller companies tend to outperform their larger peers over the long term.

These smaller companies, however, do not come without risks. Larger companies after have more analysts watching them, so their share price is often more reflective of their true value. Smaller companies, on the other hand, tend to be more volatile until they manage to establish their reputation in the market.

The long-short equity strategy of the Absolute Return Fund means that long positions will be taken in stocks that are expected to appreciate in value, while the manager will short the stocks that are forecast to decline. This strategy is seen as a means of mitigating market exposure and minimising risk.

Together these two funds offer investors two different approaches to investing. Those who are risk-averse should opt for the Absolute Return Fund, while those looking to add a bit more volatility to their portfolio should consider the US Smaller Companies Fund.