Fund review: Neptune US mid-cap fund

Fund review: Neptune US mid-cap fund

Neptune has launched a US mid-cap fund that aims to deliver consistent risk-adjusted returns with less volatility than typical funds.

The Neptune US Mid Cap fund will seek to provide capital growth by investing in between 30 and 60 US companies with at least 60 per cent of the portfolio allocated to medium-sized firms. The fund will sit in the Investment Association North America sector and be benchmarked against the S&P 1000.

It has the facility to invest in other assets such as collectives, other transferable securities, cash, deposits and money-market instruments.

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The use of derivatives and forward transactions is also expected to enable “efficient portfolio management”.

No entry charge or exit penalties will be applied, and ongoing charges have been set at 0.9 per cent pa. A minimum initial investment for the B share class is £1,000 through an adviser, and the fund can be topped up with any amount.

Patrick Close will head the fund with the assistance of James Hackman. Mr Close has been in charge of Neptune’s US mid-cap model since July 2014.

MM Comment:

The S&P 1000 (a combination of the S&P mid-cap 400 and small-cap 600 indices) has witnessed bullish growth recently by climbing more than 10 per cent since the start of the year. Therefore it could be a good time to launch a US mid-cap fund, especially if this trajectory continues.

However, as global markets appear to be currently operating with a lack of confidence, it would be naïve to assume that future growth is nailed on.

Although the reward for mid-caps is greater than blue chips, the downsides can be that much tougher. This fund undoubtedly sits towards the top of the risk spectrum and, although the manager has the facility to invest in less volatile assets, the bulk will remain in mid-caps.

Seeing as the attraction of mid-caps is reward over caution, this is unlikely to deter those viewing this fund as means of producing long-term growth. With the US political battle between Hillary Clinton and Donald Trump about to hit full-throttle, short-term volatility should be expected.

But any funds containing equities – especially small- or mid-cap stocks – should be viewed for a much longer-time horizon. Neptune’s US Income fund has kept pace with the benchmark over both three and five years so it will be hoping to take this one step further this time around.