InvestmentsDec 7 2015

Fund Review: Franklin US Opportunities

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This £87m fund was launched in January 2009 with the aim of providing long-term capital appreciation by investing in US equities. Managed by Grant Bowers, the portfolio made it into the Investment Adviser 100 Club for the first time in 2015, as performance benefited from its high-conviction, high-active share strategy.

Mr Bowers notes the fund focuses on identifying businesses that “demonstrate sustainable earnings and cashflow generation, with strong competitive positions and talented management and which are trading at valuations that do not reflect the growth opportunities we see”.

This process has remained consistent since launch. “We believe that well-positioned companies poised to benefit from multi-year secular growth trends in the market can outperform the broader market regardless of its overall direction,” he explains.

Although the team’s process is primarily bottom-up, the manager acknowledges it closely monitors the macroeconomic environment in the US. “Among factors that we feel could have the broadest impact on US companies are the upcoming US Federal Reserve decision, the inflationary environment and global economic growth conditions,” he says.

The fund’s W-share class sits at level six out of seven on the risk-reward profile, while ongoing charges are 0.84 per cent, its key investor information document shows.

The vehicle has returned consistent performance against both the Investment Association (IA) North America sector and the Russell Growth 3000 index across one and three years to November 26 2015. Over five years it has delivered a respectable 90.8 per cent compared with the IA sector average return of 79.9 per cent and the index’s gain of 102.7 per cent, data from FE Analytics shows.

The manager attributes the performance to the fact the team comprises “bottom-up, research-driven investors, and [that we] would expect stock selection to be the primary driver of portfolio performance relative to the benchmark and peers”. He notes the sector exposures in the fund are the result of the stock-selection process, in particular “where the team is finding opportunities that meet our growth, quality and valuation framework”.

The top-three sectors by weight are IT, consumer discretionary and healthcare, which are based on the team’s long-term view of the strong growth drivers in those areas. He adds: “We have used recent volatility in the energy space to add to names we feel have strong balance sheets and good core assets, which will help them survive a ‘lower for longer’ oil price environment and perform nicely when energy prices eventually recover. We used the third-quarter weakness in biotechnology to add selectively to healthcare as well. Other notable changes include an increased weight to consumer discretionary, primarily in the leisure industry.”