fund

Rated

This is one of our rated funds. They’re the ones our experts believe will do well for investors over the longer term. Top of the class!

Federated Hermes US SMID Equity F GBP

Invests in small and mid cap companies either domiciled or deriving a large proportion of their income in the US.

  • 266.37p
    Price (Inc)

    These are the shares in the fund that pay out an income to clients. The income is made up of the total dividends – the money a company can pay out to its investors – from the companies in the fund.

  • 331.94p
    Price (Acc)

    These are the shares in the fund that don’t pay out an income to clients. Any dividends – the money a company can pay out to its investors – are reinvested into companies in the fund. Despite no income, the shares should be worth more over time. Good incentive, eh?

  • 0.00%

    Initial charge

    Some funds charge you when you first invest, which is aptly known as the initial charge. They’re usually between 3-5% but at Bestinvest, we usually don’t charge you a penny!

  • 0.75%
    Annual management charge

    This is how much the fund management company charges to run the fund. It’s like paying a babysitter, dog sitter or house sitter (that makes well-informed, heavily researched changes to improve your baby/dog/house when needed).

  • 0.85%
    Ongoing charges

    This stands for Ongoing Charges Figure. It’s the cost of running a fund and includes admin fees, manager fees, administration costs, etc.

  • 0.00%
    Yield

    How much the fund is currently paying out in income to investors. It’s NOT to be confused with the overall growth of a fund – a very different thing indeed. It’s also NOT a guarantee of future pay-outs, just a snapshot. This is more what it’s not than what it is…

Prices as at 20 January 2022, fund commentary last updated 27 October 2021

The fund seeks to deliver long-term capital growth by investing in equities of small and mid-cap companies, either listed in the US or deriving a large chunk of their income from there. Lead portfolio manager Mark Sherlock looks for high-quality companies that he believes possess a durable competitive advantage, and stable, growing revenues and cash flow. The companies range in size between $1billion to $14billion in market value, with no exposure to the S&P 500 which tracks large US firms. He has described his bottom-up investment approach as “looking for companies underneath Wall Street’s radar, not shooting stars. We firmly believe the tortoise beats the hare”. Sherlock holds the stocks for the long-term, typically four or five years.

Fund summary

Sector North American Smaller Cos
Structure OFFSHORE FUND
Launched May, 2013
Size £751m
Yield 0.00%
Charging basis Income
Dividends paid 1 August, 1 February

Charges

Standard initial charge 0.00%
Initial charge via Bestinvest 0.00%
Additional bid/offer spread 0.00%
Annual management charge 0.75%
Ongoing charges figure 0.85%

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Investment process

Manager Mark Sherlock’s process involves looking for companies with a durable competitive advantage, a strong balance sheet, cash generation, and capital discipline. Healthy ESG metrics and a talented and visionary management team are other prized assets. Sherlock believes that over the long-term companies with these characteristics outperform with less risk. As such he takes a bottom-up investment approach rather being driven by what is happening in the economy. The management team has an investable universe of 2,500 names, which is slimmed down to 800 using quality and financial stability screens. They then carry out a fundamental and qualitative assessment of a company - including visiting them in the US - to see if they have the traits they desire. Stocks that have these strengths then join a watchlist of about 200 companies. A detailed company report and cash flow model is drawn up for each stock and an investment is made once they are trading below intrinsic value. The team then perform a composition review, an optimisation tool run monthly, incorporating quantitative and qualitative data on each of its companies to effectively manage position sizes.

Mark Sherlock is highly experienced in this sector, having worked on the fund since 2009 and been lead manager since 2013. He is part of a tight knit group of four in the investment team, being assisted by Co-Portfolio manager Michael Russell, and Portfolio managers Alex Knox and Henry Biddle. They are all expected to have a say in stock decisions and portfolio construction. The team have a clear and consistent investment philosophy which leads to a diversified portfolio across US economic sectors and growth and value stocks. The fund has typically outperformed in down markets but lagged strongly rising markets or those led by lower quality companies. However, for those looking for a sector neutral, more valuation sensitive approach to US SMID investing, this is a core product.

Manager research

Average monthly relative returns

  • 17/18 -0.22%
  • 18/19 -0.04%
  • 19/20 0.36%
  • 20/21 -0.80%
  • 21/22 0.08%

Bestinvest MRI

  • 3 years -0.12%
  • 5 years -0.12%
  • Career -0.02%
  • 3 years 44.40%
  • 5 years 40.90%
  • Career 61.40%

Performance figures are based on the average of monthly percentage returns relative to the benchmark index.

Mark Sherlock

Sherlock joined the Hermes US SMID team in February 2009 as co-manager of the Hermes US SMID Cap strategy and became lead manager in October 2013. He became co-manager of the US All Cap strategy in May 2015. He initially joined Hermes in 2005 as an analyst and fund manager on the UK Focus Fund. Prior to this, he was an investment analyst at Rio Tinto Pension Fund, where he had responsibility for the small and mid cap portion of the portfolio. Sherlock qualified as a Chartered Accountant with PricewaterhouseCoopers in 2002. He has a degree in Politics from Durham University, is a CFA charterholder and a Fellow of ICAEW.

Track record

Mark Sherlock has 8.7 years experience of managing mutual funds in this sector. Over this period the average monthly return relative to the benchmark index has been -0.02%. During the worst period of relative performance (from April 2020 - March 2021) there was a decline of 17% relative to the index. The worst absolute loss has been 26%.

Periods of worst performance

Absolute -26.00% (July 2019 - March 2020)
Relative -17.00% (April 2020 - March 2021)

About the MRI

Our unique indicator: the Bestinvest Manager Record Index (MRI) measures the likelihood that the fund manager is adding value through their decisions. It is based on their performance record over the course of their career, adjusted for the amount of risk taken. MRI is an important contributor to our fund rating system but it is also vital to take account of qualitative factors. It is also very important to select funds to form a cohesive portfolio with an appropriate overall risk level.

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Portfolio

The portfolio typically holds around 60 stocks.

Key Investor Information - Income

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Key Investor Information - Accumulation

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