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The US funds increasing returns month-in, month-out

25 April 2022

North American sectors were among the top performers over the past decade, but not all funds have done well in both up and down markets.

By Tom Aylott,

Reporter, Trustnet

Positive performance month-in, month-out may not guarantee the highest returns but it is worth considering for investor’s looking for consistent gains.

Although funds can rocket, a sharp drop can sweep out months’ worth of positive performance so finding a fund that offers both consistent gains and shallow drawdowns can give investors some peace of mind.

Here, Trustnet will look at the US funds that made the most positive monthly returns, having previously looked at consistent UK and global portfolios.

The IA North America and IA North American Smaller Companies sectors were both up in 78 of the past 120 months, making a total return of 297.5% and 270.3% respectively.

Total return of sectors over the past 10 years

Source: FE Analytics

This strong performance made them the 3rd and 4th best sectors over the past decade, boosted by the success of leading US tech companies such as Microsoft, Amazon and Apple (IA Technology and Technology Innovation was the best sector overall).

 

IA North America

One of the best monthly returners in the IA North America sector was a passive fund – the L&G US Index Trust was up in 85 months over the past decade, making a total return of 360.4%.

The actively managed Dodge & Cox US Stock fund was up in the same number of months, but returns were 22.7 percentage points lower than its passive counterpart.

Likewise, its maximum drawdown was higher at 25.8% compared to L&G’s 15.6% drop, making the index tracker a more lucrative and less volatile option over the past decade.

Total return of fund over the past 10 years


Source: FE Analytics

Two passive funds also made the highest total returns as well, thanks to the 609.7% increase of the Nasdaq 100 over the past decade.

The Invesco EQQQ Nasdaq 100 and iShares NASDAQ 100 funds were each up 601.9% and 595.8%, with a max drawdown of 15.4% each.

They were only up in around 78 of the past 120 months, which may lead some investors to lean towards a fund with lower returns but more frequent progressive months.

Total return of funds over the past 10 years


Source: FE Analytics

An alternative may be the Seilern America fund, which had a high total return of 456.9% while also making gains in 83 of the past 120 months.

This consistently high growth did not come with sharper drops – it had the second lowest maximum drawdown at 11.9%.

The fund with the lowest drawdown was Comgest Growth America at 11%, but it was only up in 79 months over the past 10 years and increased at a lesser rate of 366.8%.

 

IA North American Smaller Companies

Returns for the IA North American Smaller Companies sector were not as high as the broader IA North America group, but it was still a strong performer over the past decade.

That being said, the funds with the most gains month-in, month-out only increased in 80 of the past 120 months, almost half a year less than the top North America portfolios.

The Brown Advisory US Smaller Companies fund was up 304.2% over the past 10 years, beating the benchmark by 33.9 percentage points but dropped by a steep 24.4% at its worst point.

Likewise, the Legg Mason Royce US Small Cap Opportunity was up in the same number of months and returned 277.4% over the past decade but had an even sharper drawdown of 39%.

Total return of funds over the past 10 years

Source: FE Analytics

This would suggest that the relatively low number of declining months was not a signifier of consistency. Some investors may feel more unstable holding this fund than one that dropped more frequently, but by a shorter distance.

The portfolio with the lowest drawdown was the T. Rowe Price US Smaller Companies Equity fund at 18.3%, but this is 7.2 percentage points higher than the least volatile rival from the IA North America.

However the fund has also made the highest returns in the sector, with a 271.4% increase over the past 10 years while also performing well in 79 of the past 120 months.

For investors looking to add North American Smaller Companies exposure to their portfolio, the fund’s mix of the highest return and lowest drawdown might make it an appealing option.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.