The Melchior North American Opportunities Sterling Hedged Fund is being launched by Dalton Strategic Partnership LLP (DSP) in response to feedback from investors that they would like access to a US equity fund that does not expose clients to movements in the US Dollar.
Year to date the Melchior North American Opportunities Fund (MNAOF) has returned almost 8 percent more in US Dollar terms compared with 1.75 percent in Sterling terms. The introduction of the process aims to provide hedged Sterling shareholders with the returns of the Dollar assets of the fund.
“A number of clients have expressed concern about the outlook for the Dollar and would rather not have any exposure,” says Richard Jones, a Partner in Retail Sales at DSP. “By launching the MNAOSHF we are effectively taking the currency risk out of the equation and offering the pure equity returns. We believe that growth managers will perform extremely well through 2007 and 2008. We expect that the environment will become far more difficult for value investors, who have enjoyed a six year relative bull market. Our research indicates that the Melchior North American Opportunities Sterling hedged fund will be the only US equity fund with a growth style that is available to UK investors that does not have Dollar risk”.
Idea generation is enhanced by the use of quantitative screening which broadens the investment universe to 4,000 stocks and enables rapid identification of companies with inflection points in their businesses. DSP’s USD108m MNAOF launched in November 2004 has outperformed since inception by 7.65 percent with a return of 30.12 percent against the S&P 500 Index of 22.47 percent to end September.
“Providing the rapid slowdown in the US housing market is contained we would expect a strong market for US equities and re-rating of the market to better represent the compelling strength of US corporations,” adds Peter Kaye, the Manager of MNAOF. “Economic data and the path of commodity prices seem to suggest that inflationary risks are becoming more benign. In such an environment we believe the market will follow a similar path to that seen when interest rates peaked at the end of 1994, igniting a bull market, a re-rating of US equities and strong performance by growth stocks. The timing of this phase is difficult to predict but we believe that it will probably start in Q4, or the beginning of 2007. In the interim period we remain wary of potential earnings disappointments as the US economy slows and we continue to monitor inflation data for confirmation of the benign outlook.”