Why I no longer invest in US shares

Thanks for having me.

Yeah, so you're right. The fund can invest in anything quoted in the UK and actually up to 20% overseas, and we're using about 11% of that today, so actually a bit below history. The reason we invest more in mid and small caps, which is about 60% of the fund, is there's just more choice there in the market. So the UK market's quite concentrated when you go up to the top 10, top 20 companies, so there might not be many companies to choose from. Whereas if you actually look at the investable universe, there's probably about a thousand companies to choose from. The added advantage as well is as you go down the market cap spectrum and start looking at those thousand companies, there's many less other people looking at them, and so the chance of finding something uncovered or misunderstood is that much more as you go down the market cap spectrum as well.

So we've been as high as 20 actually, and we've regularly been above sort of 16 or 17%. And that tends to be in both European and US companies which are covered out of London by the Fidelity analyst team, which is really key to the process compared to Asian companies which tend to be covered out of Asia. It's primarily that we don't own any US companies anymore. So they would have been six or seven percent actually at one time, maybe up to 10% if we go all the way back to sort of maybe 2012 when we took on the trust. But today I've just found it very difficult to find any value in any of the US companies, even in unloved sectors like banks and old tech, which were some areas that we did used to invest in the US. So today we're primarily just in European companies, and actually most of that is actually in Ireland, which I count as largely another sort of home market. It's obviously right next to the UK. The economy is actually very dependent on trade with the UK. So it's more like an extension of the home market rather than sort of being truly abroad like the US or mainland Europe would be.

So it was more of a sort of gradual thing. So it's when companies sort of worked, we sold out of them. So some of the big US positions were like Electronic Arts back in 2012, and that did very well. We maybe sold that in 2015, 16. Citigroup was at one point actually the biggest position in the fund, was 6% of the fund. We sold that in 2020. So it's sort of been a gradual process where actually that percentage has been going down. And then more recently, like Schlumberger was the last US position that we sold, maybe six or seven months ago.

So I think the type of investment we look for, sort of undervalued companies that are misunderstood, can be present in any sector. But we have generally focused on some areas that I think have been consistently misunderstood. So financials has been a big weight over time, and certainly until recently, particularly banks were really out of favor. Actually, the mood maybe more people are waking up to sort of banks being good businesses producing good earnings. So if anything, we've reduced that area, but we still are overweight, also including sort of insurance, some real estate companies, some other financials. But we really do sort of invest across absolutely everything.