Potter was extremely bullish on the US early in the year, saying the US would “go gangbusters” and boost the FTSE to an all-time high.
His words turned out to be justified, with the S&P 500 the leading major market of the year-to-date, along with Japan, up 20.87 per cent, according to FE Analytics data.
Performance of major indices in 2013
Source: FE Analytics
The strong performance has led many investors to raise their weighting to the country and away from the stagnating emerging markets.
Potter, who co-manages the Distribution fund and a range of other funds of funds with Rob Burdett, says he remains bullish on the prospects for the economy in the medium-term and still thinks the US mid-west is the "new emerging market" thanks to its vast reserves of shale gas.
However, he warns that there will soon be a re-emergence of the debate about the fiscal ceiling in the US, and the negative headlines and political infighting this will provoke will see the market clipped back in the short-term.
"Our confidence in US economic data remains the same," he said. "We are still optimistic the US economy will produce the best aggregate economic growth for any economy led by domestic cyclical mid cap expansion as the shale gas revolution gets going."
"We were always overweight Japan at the time and underweight emerging markets."
"Now we find ourselves trimming back the US on a relative basis, not because we have changed our views, but we have taken profits and moved back towards neutral because we see the impending fiscal debate will come back and dominate the papers in the coming months."
"We have been upping our allocation to Europe and getting ourselves close to neutral, although we haven’t got there quite yet."
"In the US, the Republicans and the Democrats have different views on how to control the deficit – the debt ceiling will have to be raised again."
"They have raised it 80 times over the past 40 years, so they will do it, but the debate is about how to get there."
The debate in the US is about method rather than principle, he explains, with the Republicans wanting to raise the debt ceiling – the amount the federal government is allowed to borrow – to £11bn and the Democrats favouring £12bn.
Whoever wins, the country’s overall approach to handling its high debt load is correct, the manager says.
Potter says he personally favours the American belief that it is more important to go for growth to reduce the relative size of the debt and generate the revenues to pay for it.
The attitude more prevalent in Europe is to reduce the debt directly, even at the cost of the earnings that are effectively backing it.
The American approach will win the day in that country and support the equity market in the medium-term, the manager claims.
One of the main arguments of the sceptics about the US recovery is that the stock market has been rising on the back of P/E expansion rather than earnings growth.
In other words, companies are not making more money; instead investors are becoming willing to buy less for more.
The latter is sometimes regarded as being based on sentiment alone, meaning it is therefore unsustainable, but Potter does not think so.
"I agree that profit margins are at peak levels in the States, but I believe the growth we are going to see coming from the country will cause people to continue to be attracted to that market."
F&C MM Navigator Distribution was known as Thames River Distribution until a rebranding earlier this year.
The fund aims to generate a yield in the top decile of its IMA Mixed Investment 20%-60% Shares sector and has managed to do so since launch.
The fund currently yields 4.7 per cent, according to data from FE Analytics, the sixth-best number in a sector of 126 funds.
On a total return basis its numbers are also impressive, having made top quartile returns over one, three and five years.
Over three years it has made 24.69 per cent while the average fund in the sector has returned 18.94 per cent.
Performance of fund vs sector over 3yrs
Source: FE Analytics
Potter says he and co-manager Burdett are making few changes to their portfolio at the moment apart from trying to express their views on asset allocation within the requirements of their yield target by lifting and lowering weightings.
They have positions in infrastructure funds and niche funds such as MedicX, which rents GP surgeries to the NHS.
These areas are now expensive, with the closed-ended structures trading on significant premiums.
Potter says he would not be a buyer at these levels, but he is happy to hold on to them and draw the 5.5 per cent to 6 per cent yields available.
On the issue of emerging markets he is biding his time. Having been bearish all year he thinks that an end to the pain may be near, but not until the last few months of 2013.
He prefers to increase his weighting to Europe, where there is still value despite good returns over the past 23 months.
"Our view is it’s too early to buy emerging markets and Asia," he said. "Having moved from a high to a low weighting, our view from this point is we are watching to do this at some point later in the year, probably the fourth quarter."
"If you believe an economy is getting better in the margin, that’s the time you should be involved: when it is getting better, not when it has got better."
"Europe is relatively cheap. It still has issues, but those we know about. We are raising our weighting and sourcing that from our US holdings."
The Distribution fund has the most consistent track record of the nine F&C MM Navigator funds Potter runs with Burdett.
However, six of the nine sit in the top quartile over the past year in their respective sectors. F&C MM Navigator Distribution has ongoing charges of 2.41 per cent and requires a minimum initial investment of £1,000.
