In 2007, the US was the first country to enter the economic downturn, sparked by the subprime mortgage crisis, which battered the housing market and spread through the global financial system.
But now, nearly six years on from the crisis, “the US has experienced the strongest recovery”, says Richard Troue of Hargreaves Lansdown in The Independent. “The banking sector looks on a firmer footing. Mortgage lending is increasing and house prices are rising.”
So how can British investors tap into this trend? The Legg Mason US Smaller Companies Fund is one option. Run by Lauren Romeo of US firm Royce & Associates, the fund looks for undervalued hidden gems with strongcash flow, a solid balance sheet, and management teams with a track record of delivering. So far Romeo has pulled it off. The fund has generated returns of 29% over three years and 66% over five years.
Her lower exposure to defensive sectors and exposure to the gold mining sector meant that over the past year the return has been a lower, if still respectable, 11%. Romeo believes the future is bright for US small caps, particularly those with great brands or those based in “hard assets or finite entities”, says Simon Moore of Bestinvest.
She also favours firms that could benefit from the economic recovery, such as water usage consultant Tetra Technologies and energy firm Trican, which has Russian and Asian interests. With American interest rates at historic lows and companies holding record cash piles, says Moore, mergers and acquisitions should also boost markets. The annual management fee is 1.5%.
Contact: 020-7392 1929
Legg Mason US Smaller Cos top ten holdings
| Name of holding | % of assets |
|---|---|
| Reliance Steel & Aluminium | 2.60 |
| Federated Investors Inc | 2.51 |
| Helmerich & Payne Inc | 2.47 |
| Jacobs Engineering Group | 2.10 |
| Oil States International | 2.09 |
| Intrepid Potash Inc | 2.06 |
| GrafTech International | 2.02 |
| Tetra Technologies | 1.84 |
| Kennametal Inc | 1.47 |
| ShawCor Inc | 1.44 |