Multi-manager duo Gary Potter and Rob Burdett have been reducing their US exposure but are keeping one high conviction North American fund they have held for more than 20 years.
Mr Potter, co-head of BMO Asset Management's multi-manager team, said the managers have been reducing their exposure to the US across the F&C Navigator funds, ever since President Trump emerged victorious at the tail end of 2016.
However, the manager said the portfolios will remain invested in James Park's Findlay Park American fund, a holding which Mr Potter and Mr Burdett first bought into in 1998 when at Rothschilds, and which they have held in various portfolios through the duo's move through Credit Suisse and then to BMO Asset Management.
Mr Potter commented: "We have been taking down our allocation to the US markets, reducing our exposure to a more neutral position against the [MSCI] benchmark.
"In a synchronised world economy, we thought valuations in the US looked relatively stretched, compared with Asian markets especially.
"We did not completely sell out of America and buy Europe, as this is a dangerous strategy to take, but we are reasonably underweight the MSCI global benchmark."
While we cannot dictate the pace of the wind, we do have the ability to set our sails and find managers we can depend on. Gary PotterCurrently, where the team's F&C Navigator and Lifestyle portfolios have exposure to the US, he said this exposure is now approximately 3 percentage points below the MSCI global index weighting.
As at 31 January 2018, the MSCI World Index was 59.45 per cent weighted towards the US.
However, Mr Potter told FTAdviser that, while the team at BMO has become ever-more cautious about US equities, they remain "strongly convicted" about Findlay Park American, a fund which has closed to new investments.
Mr Potter explained: "If you do not invest in America at all for your clients, you are not doing right by them, but the important thing is to find the very best managers who can navigate their way through all the various market conditions: windy, bumpy, flat or calm.
"While we cannot dictate the pace of the wind, we do have the ability to set our sails and find managers we can depend on. The team at Findlay Park is one we trust to do just that."
He said he first came across James Findlay back in 1991, when Mr Potter was working for NatWest. In 1998, he and Mr Burdett "backed Mr Findlay at the launch, and have been invested with him ever since". Mr Findlay co-launched Findlay Park with Charlie Park in 1997.
"He has a straightforward way of investing and is able to identify genuine value in stocks. Yes there are periods where the fund will struggle, but what you have behind this fund is great knowledge", Mr Potter added.
The below chart shows the percentage growth, on a total return basis, from 1998 to 2018 of the Findlay Park American fund (dark blue) versus various index benchmarks (US$ basis).
However, he stressed that the BMO team was not fixated on the big-name manager, and said: "We would still have conviction in the fund even if Mr Findlay were to retire at some point.
"We are convinced he loves what he does and has no desire to step back, but even if he did, the quality of the people working on the fund, and the process is absolutely ingrained in the carpet at Findlay Park.
"Wherever we still have a position in the US, this fund will feature."
His comments followed a week of sell-offs in global equity markets, in which the S&P 500 fell from 2808.92 on 2 February to 2601.75 by 9 February.
James Bateman, chief investment officer for multi-asset at Fidelity International, called the correction a "pullback" and warned investors not to lose their heads.
He said: "Holding this course as volatility eases won’t seem easy - but at this stage of the cycle, the money is made by keeping your head when others are losing theirs.
"But what we have seen is perhaps the greatest sign of real health in markets for a long time. The tech-fuelled rally in the US had long lost any sense of reality in its valuations, the prospect of inflation remaining low forever could not last, and we have a new and untested Fed Chair. It would be more worrying if markets didn’t react to all of this."
Instead, he advised people to consider the longer-term prospects for investment in the US.
He said: "Even accounting for recent price action, US equities remain up by around 50 per cent since early 2016. The current price action may feel unusual because we have become so used to a low volatility environment, with economic data having been consistently positive across the globe in 2017."
simoney.kyriakou@ft.com
