Only eight funds from the IA North America sector have made positive returns month-in, month-out during the first seven months of 2019, according to research by FE Trustnet.
Having previously looked at the UK equity funds that have made positive total returns in every month of the year so far against a backdrop of Brexit uncertainty, in this article we look at a market whose strong run has continued to confound market watchers.
While there was significant sell-off late in 2018, the US market has returned to positive returns this year buoyed by the prospect of a change in tack by the Federal Reserve and its approach to interest rates.
In US dollar terms, the S&P 500 has made a total return of 19.84 per cent to 31 July, rebounding after its first calendar year loss since the financial crisis.
Monthly returns of the S&P 500 in US dollar terms in 2019
Source: FE Analytics
Even the S&P 500 index has made a monthly loss, in US dollar terms, this year falling by 6.42 per cent in May as the US-China trade dispute flared up again.
Indeed, just a handful of funds from the sector have managed to deliver positive sterling returns in each month of the year so far.
FE Trustnet found that just eight funds of the 152-strong £61.7bn IA North America sector have delivered positive returns in each month of 2019.
Below, we take a look at those funds.
First on our list – in alphabetical order – is the Investec American Franchise fund, the £347.4m, five FE Crown-rated fund managed by Michael Hayward.
Hayward focuses on high-quality companies able to generate high levels of return on invested capital and free cash flow, which are typically associated with strong brands or franchises.
As such its top holdings include credit card company Visa, software firm Microsoft and internet registry Verisign. During the first seven months of the year the fund has made a total return of 30.55 per cent.
Next up is the £229.4m Jupiter North American Income fund – overseen by Stuart Cox since December 2018 – an equity income fund investing primarily in blue-chip companies.
Given its income focus, the fund has a yield of 2.2 per cent and has almost a quarter of its portfolio invested in financial stocks. To 31 July, the fund has delivered a total return of 26.44 per cent in 2019.
The £680.5m LF Miton US Opportunities fund is next on the list. Co-managed by Hugh Grieves and FE Alpha Manager Nick Ford, the strategy targets long-term total returns investing across the market cap spectrum with a focus on small- and mid-cap stocks.
Analysts at FE note that the fund’s managers invest in a concentrated portfolio of names with a preference for companies demonstrating strength across the market cycle. The fund has made a total return of 28.98 per cent over in the year to 31 July.
Source: FE Analytics
Marlborough US Multi-Cap Income is another strategy that invests across the market cap spectrum, albeit with an income focus. The £65.3m, four FE Crown-rated fund is managed by Brad Gardner and Brad Weafer and has a yield of 1.43 per cent. It has returned 34.31 per cent over the period under review.
Launched a year ago, New Capital US Future Leaders is a mid-cap fund overseen by Mike Clulow “designed to capture the rapid growth of emerging companies that are benefiting from the economic transformation brought about by disruptive business models in the US”. As such, sectors favoured by the fund include technology, healthcare, financials and consumer discretionary. During the first seven months of the year it has returned 36.47 per cent, the best performer of all nine funds.
Robeco QI US Conservative Equities is a $271.3m fund managed by Arlette Van Ditshuizen, Pim van Vliet, Jan Sytze Mosselaar, Maarten Polfliet and Arnoud Klep. It targets returns comparable to the US market but with a “distinctly lower level of downside risk”, using a quantitative model to select stocks based on measures including market sensitivity, volatility, valuation and momentum. The fund is up by 21.53 per cent in the year through July.
The final two funds are ASI American Equity Income and VT Tyndall North American.
The former is managed by Scott Eun and targets income and capital growth over the longer term and has significant weightings to the information technology space (21.5 per cent) and healthcare (18.5 per cent). It has returned 26.92 per cent.
Source: FE Analytics
The £28.5m VT Tyndall North American fund targets long-term capital growth is managed by Felix Wintle, formerly head of US equities at Neptune Investment Management.
Wintle uses a top-down analytical process to determine which stage of the cycle markets are currently at, while its stock selection process is based on identifying long-term thematic winners. Its tactical selection is driven by the growth and inflation outlook. It has made a total return of 26.88 per cent.