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Threadneedle’s global man sees divi potential in US financials & shale
by Elsa Buchanan on Oct 30, 2013 at 13:23
Jonathan Crown, co-manager of the Threadneedle Global Equity Income fund, is finding plenty of income opportunities in the US, where he plays the financial sector deleveraging and the shale gas boom.
Crown, who runs the £650 million fund with Citywire A-rate Stephen Thornber (pictured), overlooks any stock yielding less than 4%, and while he says the US does not have a dividend culture, more than a third of his portfolio is invested across the Atlantic, by far his largest regional holding.
‘Even if it is not in their culture partly due to tax and remuneration on earnings per share, we got more positive last year and have added in the shale gas space,’ Crown said.
To play the US energy revolution theme, he has added chemical maker and refiner Lyondellbasell and petroleum refiner and marketer HollyFrontier to Enterprise Product Partners (1.6%), which he first bought into in 2010.
With liquefied natural gas ranging between $3.20 and $3.34 in the US versus over $10 in the rest of the world, Crown says the US has been a big beneficiary.
‘Ethane should remain cost advantageous until new US production capacity comes online in 2017 [and] the market underestimated the scale and sustainability of the cost advantage and significant cash return potential it has,’ Crown said.
However, he points to the fact Threadneedle’s global energy team believes that US energy exports are constrained by infrastructure and politics in the near term, leading him to take a cautious approach.
‘The industry is susceptible to commodity and macro risks, so a smaller position size is appropriate,’ he added.
He is also building his position in financials (21% of the portfolio) and while he is underweight banks that are selling assets, he favours private equity and asset managers.
‘Investors are increasing their allocations to alternatives and to larger players within alternatives, and banks’ deleveraging is creating opportunities,’ Crown said.
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