Many commentators point to the efficiency and over-analysis of the US market as the prime reason why so few funds outperform; however, Robinson says there is no reason why active managers should not be able to beat the S&P 500 if they invest for the longer term. He warns that turnover and short-termism in the country have massively increased over the past decade, dragging the returns of funds back to their benchmark, and that there are signs the same process could be beginning in the UK.
"Long-term investing is rare in the US and that’s being driven by increasing news-flow and by career risk and people being scared of being different," he said.
"What we have seen in the US is a growing turnover over time. Is this driven by hedge funds? It is to a degree, but even if you look just at the mutual funds, turnover is 70 to 80 per cent on average."
"I would imagine the situation in the UK is similar."
Data provided by Robinson from research carried out in the US shows that the average active share on US funds has been steadily falling in recent years.
Active share calculates the degree of exposure to the benchmark a given fund demonstrates.
It was developed by US economists Martijn Cremers and Antti Petajisto in a series of academic papers on active management.
Their figures show that in 1980, 60 per cent of American funds had an active share of 80 to 100 per cent.
By 2000 this had fallen to around 20 per cent, and although the figure increased slightly in the years up to 2007 – perhaps thanks to increasing confidence in the bull market – the proportion never reached 30 per cent and is now under 20 per cent again.
Robinson says this is a major reason for the well-known phenomenon of fewer active managers outperforming in the country.
"Managers are unwilling to stick their neck out, as it can result in higher volatility, but over a period of time you will struggle to outperform the market if your portfolio resembles the market," he said.
"To beat the index, you have to differ from it."
Robinson works on the fund in a team run by FE Alpha Manager Mick Brewis, who has headed up the £344m portfolio since 1997.
Over three and five years the fund has slightly underperformed the S&P 500, according to data from FE Analytics.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
Robinson says he is unconcerned by this given the type of businesses that have been pushing the index higher.
"It has been a year that low-quality businesses have done well – those with more debt and lower margins," he said.
However, over the longer term the fund has outperformed to a very significant degree.
Over 10 years it has returned 124.61 per cent while the benchmark has risen 116.02 per cent. The average fund in the sector has made just 99.26 per cent.
Over 15 years the outperformance is even starker. The fund has made 128.77 per cent over that time while the index has made 92.31 per cent and the sector average 67.33 per cent.
Performance of fund vs sector and index over 15yrs
Source: FE Analytics
To a large degree this is due to it losing less money in the dotcom crash of the early 2000s.
Over the past 15 years, Brewis’ portfolio has displayed one of the lowest betas of the funds in the IMA North America sector, its figure of 0.71 putting it 30th out of 31 funds.
This means that its returns are less dependent on those of the index than almost all of its peers, suggesting that it truly is more active than its rivals.
The tracking error – the standard deviation of the daily returns against those of the index – of 14.35 per cent puts it in 26th place out of 31 funds in the sector.
Over that long timeframe of 15 years, the fund has added annualised alpha worth 2.73 per cent to its benchmark.
It was also recently featured in FE Trustnet's run-down of the funds to add the most alpha over the past five years in the US.
Robinson stresses that the managers try to look for companies with long-term earnings streams and the potential for earnings growth.
"We believe that growth is rewarded. We are looking for growth that’s under-appreciated," he said.
"In the short-term, the share-price movements are largely random; we are trying to produce long-term outcomes."
Robinson says that the US economy is in decent health, and will do well on a three- to five-year view.
One key strength is the fact that the banking system has become stronger, and is increasingly backed by retail deposits rather than wholesale financing, making it more stable.
Robinson also says that the markets may be underestimating the effect of shale oil on the economy.
The same fracking techniques that have produced huge amounts of shale gas can be used to extract previously inaccessible oil reserves.
Robinson says that the amount of gas that could be extracted was consistently underestimated, and the same could be true of the relatively new shale oil phenomenon.
In a series of articles in the coming weeks, FE Trustnet will be looking at truly active funds and closet trackers in various sectors, and how the different categories perform against their respective benchmarks.
