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The US firms that are testing their staying power

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The US firms that are testing their staying power

As more US asset managers start trying to get a European foothold for the first time, those who have been here for a while are looking to up their game.

Tweedy Browne, for example, has been active in Europe since 1996 without really establishing itself as a well-known player.

The New York-based firm, which has $12 billion in assets under management has, perhaps, suffered from the large number of value-oriented firms targeting Europe with their strategies. Indeed, like many of its peers, the firm is eager to emphasise its value credentials. It boasts a connection with the Godfather of value investing Benjamin Graham, as his firm Graham-Newman was one of Tweedy Browne’s main clients when it was a brokerage under a previous name in the 1930s, 1940s and 1950s.

It converted into an investment manager in the 1950s and now has three funds available in Europe: a global high dividend value fund, an international value fund and an all cap US value fund, all of which have beaten their benchmarks in the past three years.

The assets in the Luxembourg strategies remain modest, however, and the firm says it focuses on performance rather than asset-gathering. The majority of its European clients are currently long-term investors, predominantly from family offices, who are convinced by the merits of value investing.

The funds are managed by the firm’s four partners: John Spears, William Browne, Tom Shrager and Robert Wyckoff, all stalwarts of the company, having been there for between 20 and 30 years.

A more recent entrant into the European market is Brown Advisory, the Baltimore-based boutique that launched a Luxembourg range in 2008. It now has four US-focused funds available in Europe: Brown Advisory American, US Equity Growth, US Equity Value andUS Smaller Companies.

Like Tweedy Browne, there are four managers listed at the helm of the funds: Christopher Berrier, Kenneth Stuzin, Richard Bernstein and Timothy Hathaway. They recently received their first Citywire A-ratings, having achieved a three-year track record. And although the assets in them are still just under €700 million, they have been increasing their following among Europe’s fund selectors and the prospects for further growth in assets look promising given their funds’ performance.

Indeed, fund selector Philippe Gaboriau from Barclays Wealth Managers France – a fund selector who has picked the group’s US Equity growth fund – recently told Citywire he was very happy with his investment in the Brown Advisory US Equity Growth fund.

Completing the trio of US fund managers under the spotlight this month is Turner Investments, headed up by founder, chairman, CEO and fund manager Bob Turner.

In contrast with the numerous value managers targeting European markets, Turner is an avowed growth specialist. Like Brown Advisory, it launched its funds in Europe in 2008: Turner Global Growth Equity and the recently restructured Turner US Concentrated All Cap Growth Equity fund.

In addition, the group branched out in long/short strategies in 2005, with single-sector funds, US funds and a Spectrum strategy, which is split into eight sector-specific portfolios run by different people. Turner hopes to bring this alternative expertise to Europe in the coming year.

Turner himself is a veteran of more than 30 years’ investment experience. He describes himself as ‘a tech analyst by day’ and has a slant towards the sector in his funds.

‘Tech is a segment we continue to favour and believe it offers the best returns over the next quarters,’ he said recently. ‘Tech moves in cycles every 10 years or so, and we feel that we’re in the early stages of a major cycle now.’

He believes earnings have a strong impact on stock market returns and that by focusing on this it will see him continue to outperform in the long term. In the near term, meanwhile, he thinks that if the growth part of the market continues to outperform, then what he describes as ‘classic growth stocks’ such as Apple, Google and Salesforce.com, will continue to lead the way.

‘These are companies able to produce strong earnings growth regardless of the economic backdrop,’ he said.

Looking at the US economy as a whole, Turner is positive about the impact QE2 has had on the US: ‘We are seeing nice growth in the economy now; it’s not where we need to be, but there is job creation, the manufacturing numbers are off the chart and profits are reaching record levels. So QE2 is working the way it should.’

Verdict:

In a crowded market place, the prospects for Tweedy Browne, Brown Advisory and Turner Investments seem mixed. Tweedy Browne will continue to jostle for position in Europe with a number of other, better-known value specialists and may continue to struggle to assert itself unless it produces particularly outstanding numbers. Turner’s focus on growth may stand it in good stead to continue to grow its presence over here, though perhaps Brown Advisory with its focus purely on the US is best-placed to succeed, with domestically focused products focused on different areas of the market which may provide something for everyone.

This article originally appeared in the May 2011 edition of Citywire Global magazine.