London-listed investment trusts have increased exposure to US markets in recent months and take a generally bullish stance as the presidential election vote draws near.

With polls predicting a tight race between the current White House occupant Barack Obama and his Republican challenger Mitt Romney, the
Association of Investment Companies pulled together comments from several trusts.

The North America and North America smaller companies investment company sectors are up 19 per cent and 10 per cent in the year to September 30 respectively, compared to a 6 per cent rise for the average investment company. They have also outperformed the wider sector over three years, the AIC said.

While some trusts have trimmed exposure, a number have made notable increases, figures show. The AIC’s fund manager poll in December 2011 showed that 19 per cent of those polled expected the US to be one of the top performing regions in 2012.

Holdings in the US of many of the global growth and global growth and income companies have increased over the year to date. The average AIC member in the global growth sector has increased exposure to the US from 22 per cent at the end of December 2011 to 26 per cent at the end of September 2012.

Examples of US bulls

Alliance Trust, for example, has increased its US holdings by 13 percentage points since the end of 2011, from 20 per cent to 33 per cent at the end of September 2012.  Edinburgh Worldwide has increased US exposure by 8 percentage points, and EP Global Opportunities and Mid Wynd International have each increased their exposure by 7 percentage points.

"Domestically, we are seeing improved data coming out of the US, most notably in housing, with the latest unemployment figures also encouraging. This should help insulate the US from weakness elsewhere in the world, whilst the general resilience of US companies continues to encourage,” said Matthew Strachan, head of North American equities at Alliance Trust.

“We expect that the US presidential election will be close, but that President Obama will be returned for a second term, however without a majority at Congressional level, which may hamper delivery of his program. After the elections both the fiscal cliff and debt ceiling will require urgent attention, but we believe that political expediency will prevail preventing the worst case scenario materializing,” Strachan said.

“Since we reorganized the portfolio earlier this year, we have been increasing our exposure to the US and over £800 million (around $1.3 billion), or just under 40 per cent, of the portfolio is now directly invested in the US,” he said.

“We are particularly optimistic about the implications of growing oil and gas production, using new technology to unlock the potential of shale deposits across America, which we see as having far-reaching implications for energy security and cost, with knock-on effects into many other industrial sectors. Also of interest to us is the technology sector, where the pioneering frontier spirit drives the US dominance of the world market, it represents over 70 per cent of the global sector by market cap, despite persistent and fierce competition from the Far East.”

Garrett Fish, manager at JP Morgan American Investment Trust, is also positive.

“In recent weeks the equity markets have responded very positively to both the actions of the central banks in Europe and the US, and the economic news, which in aggregate has beaten expectations. The equity market has been switching back and forth between feeling glass-half-empty to glass-half-full; currently the glass-half-full view prevails,” he said.

“We remain overweight the technology, healthcare and energy sectors and underweight the utilities, materials and industrial sectors. We are neutral the consumer discretionary and consumer staples sectors. We have been selling down our overweight in telecom and reducing our underweight position in financials. We continue to look for attractively valued companies that can expand their businesses in a very low economic growth environment. We have not shifted our positions significantly in the year to date but we continue to look for opportunities to add to and decrease existing positions as market sentiment provides valuation opportunities.”

Healthcare

Daniel Mahony, manager at Polar Capital Global Healthcare Growth and Income, believes that the make-up of Congress will have more of an impact than the race for the presidency.

“If Obama is elected, expansion for healthcare coverage will continue as planned – a big boost for hospitals and for healthcare utilization in general. If Romney is elected, then healthcare reform may be curtailed in some ways – we may not see the large expansion of coverage that was part of the original plan. Congress needs to get to grips with the fiscal deficit – healthcare spending, especially on Medicare, will come under scrutiny next year irrespective of who is elected.”