James Thomson, primary manager of the fund, said the drastic cut was down to a combination of uncertainty around Brexit and the volume of investible opportunities in the US market.
He said: “Personally, I still think that the US is one of the best places in the world to invest, and so where I guess we’ve really pulled back is the UK.
“A year ago I had 25% of the fund in the UK, today I have just under 7% so we have significantly reduced our UK exposure and Brexit is the reason.”
Thomson argued that while Brexit was not necessarily going to “bring trouble”, it does invoke a fear of the unknown.
He said: “While I have this global flexibility, why not use it? If there is uncertainty out there, why get bogged down in the debate when I can just find a great idea overseas?”
Thomson added: “Brexit – I just don’t know what will happen because there are too many variables out there, but what I do believe is that we won’t get much clarity until the very end of the process. The type of Brexit we will have remains unclear and while that uncertainty exists, I’m just going to steer clear.”
The fund manager is preparing for 2018 with the view that “macro is likely to disappoint in the second half of next year” as “headwinds built up a few months ago start to feed into the economy”. Referring to interest rates going up or oil price increases, he believes “they will all have a dampening effect on the overall economy”.
With that in mind, Thomson is steering the global opportunities fund towards companies that have reliable growth and is focused on internet and technology stocks.
Love and avoid
The growth investor argued that he doesn’t favour to the commodities, industrials and banks sectors as he believes they are highly economically sensitive. Thomson said he has “virtually no exposure” to commodities and no “big universal banks such as JP Morgan, Bank of America, Citigroup”.
“Areas I love include internet tech names with some of my largest holdings being Amazon, Facebook, Google,” he added.
“I also have other tech names that are a little less obvious such as Paypal which has been a huge success and I think will continue to be, as well as Tencent which is my only holding in Asia and is the gaming giant in China.”
While he claims these stocks are at the top of his list, he said his focus going in to 2018 is on some essentials for “reliable back to basic growth” such as food and beverage, tobacco, healthcare names, growth stocks and large caps.
Thomson concluded: “My overall view for next year is that I think we could be in for a stormier 2018. Obviously we’ve had almost eight years of bull market now, some of the indicators that I look at potentially indicate some deterioration in the macro next year.
“If the economy deteriorates, value stocks could be the most vulnerable so it’s best to avoid these.”
Thomson recently reduced cash in the portfolio to just 0.64%, its lowest position since he took charge of the fund in 2005, because of the wealth of buy ideas currently in the market.
