By Stephen Womack
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How do you successfully invest in the US? One answer might be to turn your back on the financial centres of New York and Boston.
This is the strategy used to run the Baillie Gifford American fund, which is controlled more than 3,000 miles away from the bustle of Wall Street by a team in Edinburgh.
Mick Brewis, who manages the fund, says: ‘Wall Street’s big weakness is short-termism and an obsession with quarterly results. Distance from the markets can lend a perspective.
Keeping a distance from the markets: Strategy pays dividends for Mick Brewis
‘You have to be aware of what happens outside the US. The trend to globalisation creates a lot of opportunities for US companies.’
Results for the fund appear to back up his view. Brewis has managed to beat America’s SP 500 index by an average of 2.4 percentage points each year for the past decade, a strong record in a market where it is notoriously difficult to beat the index. This puts his fund among the top ten in its sector.
Ben Willis, head of research at investment adviser Whitechurch Securities in Bristol, says: ‘The US market is efficient and it is difficult to find a fund that can consistently outperform.’
Brewis has managed to do this by taking a long-term view and looking for hidden value in the shares he picks. The average stock in the fund is held for four years, giving time for opinions to change and the market to catch up with his way of thinking.
Brewis says: ‘We are biased towards those firms with a strong competitive position. Capitalism is all about upstarts coming in to destroy the established firms, so we look for those that are able to defend their position, either because of a strong brand or proprietary technology.
‘They are not necessarily perfect companies, but ones that are underappreciated.’
The fund has a concentrated portfolio, with just 41 holdings and a bias towards mid-sized companies.
Technology firms account for about a quarter of the fund, but Brewis is selective â€" not a penny is invested in IBM or Microsoft. Instead there are big holdings in companies including Apple, eBay and F5 Networks, which manages internet data flows.
Willis says: ‘The fund is benefiting from positive economic news in the US, but is not reliant on its economy as a large proportion of the stocks held generate their earnings abroad.’
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