In the global investing big picture, the United States stands out as the anchor, according to Keith Walter, co-manager of the Artio Global Equity Fund Ticker:(JGEIX).
“The U.S. still drives the world's economy,” he said. “Valuationwise, Europe is far more attractive, but it's not known for the kind of growth you can get in the U.S.”
Of the $54.6 billion managed by Artio Global Investors Inc., $1 billion is managed in the global equity strategy.
The portfolio currently has a 49% weighting in U.S. stocks, which compares with a 43% weighting for the MSCI All Country World Index.
One of Mr. Walter's favorite sectors is banking, which is reflected in his position in Bank of America Corp. Ticker:(BAC).
At 1.7%, the bank is the second-largest position in the fund.
“There's a very steep yield curve right now, and banks in the U.S. get to capitalize on that, which means they're printing money in this environment,” he said.
The appeal of U.S. stocks at a time when the economy is emerging from a recession comes down to capitalist versus socialist systems, Mr. Walter said.
“In the U.S., we're seeing a lot of companies beat earnings expectations right now because of all the cost cutting that they did,' he said. “You don't see that in the more socialist European countries, because they have policies in place to keep employment stable regardless of the economy, and that prohibits their ability to cut costs.”
Mr. Walter's basic strategy is built on three main principles: diversification as a risk management tool, broad-style core investing and bottom-up fundamental stock picking.
He separates the global stock universe into emerging, developed and Japan markets.
The emerging market is the one area where he will start with a macro, top-down analysis and then get into the more specific stock picking once an allocation target is determined.
Emerging-markets stocks currently represent 15% of the portfolio, which is slightly overweight the index at 12%.
During the global economic turmoil of the past few years, Mr. Walter used the U.S. market and the emerging markets to balance one another in an effort to capture performance and reduce risk.
A year ago, for example, the portfolio had a less than 30% weighting in the U.S. and more than 20% in emerging markets.
But a year before that, in March 2008, the strategy was at more than 50% in U.S. stocks and at about 7% in emerging markets.
“This is our way of managing risk and providing opportunity,” he said.
Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.
