Just 11 funds in the IA North America sector are currently in the top quartile for the past one, three, five and 10 years, research by FE Trustnet has found. 
Having previously looked at the IA Global Sector and IA UK All Companies sector, we now turn our attention to the US equity market – which led the rally for much of the bull market that followed the global financial crisis.
Source: FE Analytics, data to 30 Apr 2019
The chart above shows the 11 funds that were top quartile over the one, three, five and 10 years to the end of April 2019 (ranked in order of 10-year total returns).
The standout fund amongst them all was the £2.1bn Morgan Stanley US Growth fund, which generated the highest returns of the 11 funds across three of our four tested time frames.
Morg Stnly US Growth, which is managed by Dennis Lynch and a team of five deputies, made a 546.14 per cent return over 10 years – the highest return in the whole sector.
The five FE Crown-rated fund has the aim of generating long-term growth by investing in high-quality companies as well as emerging businesses.
Tech giant Amazon is the fund’s biggest holding at 8.3 per cent. Indeed, the fund is overweight in the telecom, media and technology sector with the portfolio weighted to 46.99 per cent in that sector.
The fund has an ongoing charges figure (OCF) of 0.94 per cent.
Performance of fund vs sector over 10yrs
Source: FE Analytics, data to 30 Apr 2019
Whilst Morg Stnly US Growth has outperformed across most of the time frames measured, it has not been the best fund over the past 12 months: UBS US Growth beat it to the top spot after making 26.67 over the past year.
The £199.5m fund is managed by Peter Bye, who aims to achieve long-term capital growth by investing in companies he believes to be quality-growth names but have had the size and duration of that growth underappreciated by the market.
Holdings in the fund are put into three different groups: classic growth, elite growth and cyclical growth. Classic growth focuses on the short-term market movements that allow stocks to be bought at attractive prices; elite growth looks for companies operating in a hyper-growth phrase but are being mispriced by the market; and cyclical growth occurs when pricing anomalies result from the market misunderstanding secular growth trends.
Currently UBS US Growth is largely finding these growth opportunities in the consumer, discretionary and information technology sectors, which are its largest overweights.
The fund has an OCF of 0.88 per cent.
Whilst the top performances over all four time frames were dominated by just two funds, there are other notable funds worth mentioning on the list.
Morgan Stanley US Advantage is the largest of the 11 on the shortlist, with assets under management of £6.2bn.
Managed by Dennis Lynch and five deputies, the fund looks for high-quality established companies with strong brand recognition, sustainable competitive advantages, strong current free-cash-flow yields and favourable returns on invested capital trends.
Morgan Stanley US Advantage has an OCF of 0.85 per cent.
The next well-known IA North America member that is the £2.1bn Baillie Gifford American fund.
It was in the top four out of all of the time frames measured and produced the second highest returns in both the three and five-year periods.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics, data to 30 Apr 2019
Managed by Gary Robinson, Helen Xiong, Tom Slater and Kirsty Gibson, the fund made a 474.50 per cent return over the past 10 years, beating the S&P index by over 100 percentage points in the process.
Baillie Gifford is known for its active, bottom-up, growth investment approach, which has led to strong returns across its fund range over the long term.
The process behind the fund seeks out exceptional US-listed businesses, focusing on growth potential, culture and edge. Holdings are seen as being transformational (those that use new technology to transform existing industries), dynamic (those that reach customers using physical rather than digital channels) or enduring (those with a smaller growth rate and longer holding period).
The FE Invest team, which has the fund on its Approved List, said: “The fund exhibits above-average volatility due to it being heavily concentrated in high conviction positions. Overall, the fund would be most suited to a portfolio with a long-term investment horizon as well as one that can tolerate high volatility.”
Baillie Gifford has a 0.52 per cent OCF.