Large-cap trend sees Jones raise cash to 9%

Schroders’ Jenny Jones has increased cash in her £824m US Mid Cap fund to 9%, warning valuations in US markets are favouring large caps.

The group’s head of US small and mid cap equities said valuations on the Russell 2000 versus the Russell 1000 are pointing towards large caps at present, with smaller companies looking expensive in comparison.

As a result, she has allowed cash to tick up from 7.8% as at the end of October.

“Cash is not low, it is around 9%. There is a lot of worry out there and large caps, whose earnings have been stronger than expected, tend to do better in a downturn.”

Jones, whose fund has outperformed all-comers in the US over the last five years, is holding cash back in the fund amid a decline in liquidity, particularly at the smaller end of the market.

She warned there are a number of headwinds facing US consumers which could feed through to the economy in the near term.

“We have a consumer that is trying to deleverage, and we have government spending which should be cut,” she said.

However, the manager is confident she will find interesting opportunities despite her fears over the economic environment.

“I try to find companies where growth has been mispriced, which are turnarounds, or which are Steady Eddies. My confidence level in finding companies today is much greater than in 2007,” she said.

In the past five years, Jones’ fund has delivered 35.6%, ahead of the IMA North America average of 9.9%, according to Morningstar.