US equities have delivered a third consecutive year of double-digit gains in spite of US tariff policies, geopolitical uncertainty, and looming doubts over the sustainability of artificial intelligence spend.
This is not a backdrop where investors would want to own all listed stocks within the S&P 500 index, according to Jyotsana Wadera, senior client portfolio manager at Putnam Investments.
“I don’t think you want to own all 500 companies within the S&P 500 index; there are distinct winners and losers,” she told FSA in an interview.
“You’re in the crosshair of tariffs if your company is manufacturing in China. But we have the ability to avoid those companies, and companies with more exposure internally to the US may have better outcomes.”
“We know that passive is one of our competitors,” she said. “But with a passive option you will never outperform in an upmarket and you will never outperform in a down market.”
Wadera said that the FTGF Putnam US Research strategy has an approach that has enabled it to consistently outperform in seven out of eight of the last calendar years, according to data from Morningstar.
The strategy runs between 100 and 130 stocks, managed by 10 individual portfolio managers who are experts in their respective sectors, ranging from technology to healthcare to energy.
These portfolio managers run their respective sleeves depending on their relevant sector’s weighting in the S&P 500 portfolio, and the whole portfolio is then overseen by Kate Lakin, Putnam’s director of research alongside Matt LaPlant, a senior quantitative analyst.
Wadera emphasised however, a lack of a committee model with a slow approval process: “These 10 portfolio managers make the decisions,” she said. “We do not rotate our analysts; we hire industry experts for a reason.”
This approach, along with the strategy’s track record, seems to be resonating with investors globally.
Wadera said the strategy has raised over $1bn in assets over the past year. Albeit, a large chunk came from leveraging the resources of Franklin Templeton which acquired Putnam Investments in 2024.
Despite global calls for investors to diversify their US asset exposure, Wadera says most investors she meets with are underweight US equities relative to the MSCI World index.
She has observed that most non-US clients typically have between 50% to 60% US equity exposure, despite the MSCI World Index having 72% allocated to US equities.
“No client is going to have 70% even though that just makes them neutral,” she said. “Last year all you heard was talk about the end of US exceptionalism, but since ‘Liberation Day’, US equities are up over 30%.”
