Skip to the content

The US funds that have ticked (just about) all the boxes since 2020

08 February 2023

Trustnet scours the IA North America sector for funds that have beaten their peers no matter how performance is assessed over the past three years.

By Gary Jackson,

Head of editorial, FE fundinfo

An index tracker invested in sustainable US companies has beaten active funds in the IA North America sector on a wide range of risk and return measures in recent years, Trustnet research has found.

This annual series looks for funds that have outpaced their peers on all fronts over the past three years, ranking sectors on a blend of 10 different risk and return metrics.

Trustnet works out an average percentile score for each fund’s cumulative three-year total returns, volatility, alpha, Sharpe ratio, maximum drawdown, upside capture and downside capture over the past three years, as well as returns in each of 2022, 2021 and 2020. Where were necessary, we use the most common benchmark in the sector for all the funds (the S&P 500, in the case of IA North America funds).

The lower its average percentile, the better a fund has performed overall as it will have been in the upper echelons of its peer group for multiple metrics over the past three years.

Total return of fund vs sector and index over 3yrs to end of 2022

 

Source: FE Analytics

Coming in first place with an average percentile ranking of 20.9 is the iShares MSCI USA SRI UCITS ETF. It’s up 47.5% over the three years examined, a third-percentile result, and is also towards the very top of the sector for metrics such as alpha, Sharpe ratio, maximum drawdown and upside capture.

The ETF aims to offer exposure to US companies with “outstanding” environmental, social and governance (ESG) characteristics and minimal controversies. To aid with this, companies involved in industries such as weapons, alcohol, gambling and nuclear power are screened out while additional environmental screens are applied to areas like oil & gas and power generation.

As a result, the fund holds a MSCI ESG Fund Rating of AAA, which is the highest award from the rating house. Some 72% of the portfolio is in companies considered by MSCI to be ‘ESG Leaders’ and it has zero exposure to ‘ESG Laggards’.

Sustainability is a major theme in the asset management space, with strategies that channel capital into companies with top ESG credentials becoming increasingly popular. This funds performed strongly in 2020 and 2021 but struggled somewhat last year after rising interest rates hit growth stocks hard, reflected in iShares MSCI USA SRI UCITS ETF’s 43rd percentile showing in 2022.

 

Source: FE Analytics

While the top IA North America fund in this research is a passive option, the table above shows that many in the top 10 take an active approach.

CT US Equity Income is in second place with an average percentile score of 23.3, thanks to high returns, Sharpe ratio and alpha combined with low volatility and downside capture.

Managed by Benedikt Blomberg, the fund aims to provide a higher yield than the S&P 500 so looks for companies that have above average income generation potential. The portfolio is a blend of growth and value stocks (usually large-caps), which helps to explain how it has held up in recent years, when market leadership has oscillated between the two investment styles.

JP Morgan comes out well in this study, with three of its funds winning spots in the top 10: JPM US SelectJPM US Select Equity Plus and JPM US Research Enhanced Index Equity.

The three funds has different managers but there is a degree of overlap – all have just over 20% of their portfolio in tech stocks with Microsoft being the biggest holding and they focus on larger companies. JPM US Select and JPM US Select Equity Plus have a bias towards growth stocks while JPM US Research Enhanced Index Equity has more of a blended approach.

Premier Miton US Opportunities, managed by Nick Ford and Hugh Grieves, is another of the better-known funds on the list. It is up 45.3% over the past three years and, unlike many of the funds highlighted so far, its managers look beyond just large-caps when building the portfolio.

 

Source: FE Analytics

When it comes to the funds that have been towards the bottom of the IA North America sector for multiple metrics in recent years, two funds are tied: GAM Star US All Cap Equity and Morgan Stanley US Advantage, with average percentile scores of 86.7.

Both funds invest in growth stocks and have significant overweight to the information technology sector, which have suffered some of the biggest falls as central banks hiked interest rates.

Indeed, the same can be said for many of the funds on the list above – FE Analytics shows that seven of the 10 have more than 40% of their portfolios in telecom, media and technology names.

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

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.