Investors have, in general, tended to favour passively managed funds for exposure to the US as few active portfolios in the sector have managed to consistently add value.
The Pioneer SICAV US Fundamental Growth fund did make the list of most consistent funds after delivering top-quartile performance in 2009, 2010, 2011 and 2012 and second-quartile performance last year, but is only available to institutional investors.
Although there were a number of actively managed retail funds that came close to beating the sector in each year between 2013 and 2009, the majority of them underperformed in the falling market of 2011.
One such portfolio is the $1.4bn Legg Mason Clearbridge US Aggressive Growth fund, which is co-managed by Richie Freeman and Evan Bauman.
Source: FE Analytics
The fund was a top-quartile performer and beat its Russell 3000 Growth benchmark in 2013, 2012, and 2010 (it was a top-quartile performer in 2009, although it narrowly underperformed against the index).
However, while its benchmark returned 2.49 per cent in 2011, the fund lost 1.92 per cent – meaning it underperformed the sector by around 40 basis points.
Nevertheless, its small loss in 2011 has had little impact on its cumulative returns.
According to FE Analytics, it is the sector’s best performer over five years, with returns of 137.9 per cent and has beaten the Russell 3000 Growth index by close to 20 percentage points. It also sits comfortably in the top quartile over one and three years.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
There are three funds of funds that count Legg Mason Clearbridge US Aggressive as a top-10 holding, including Rathbone Multi Asset Enhanced Growth and Rathbone Multi Asset Strategic Growth, which are both headed up by FE Alpha Manager David Coombs.
Elizabeth Slover’s BNY Mellon American also narrowly missed the cut due to a poor 2011.
It too has been a top-quartile performer in four of the last five calendar years, however it fell a lot further than Legg Mason Clearbridge US Aggressive Growth in 2011 and eventually lost close to 10 per cent that year, which has hindered its five- and three-year returns.
Other funds that have narrowly missed out on featuring on the list include BlackRock US Opportunities, GAM Star Capital Appreciation US Equity and JPM US Select Equity Plus – all of which fell into the third or fourth quartile in 2011.
However, before writing off actively managed funds for their inconsistency of returns, it is worth pointing out that no tracker funds have made the list, because the average portfolio in the IMA North America sector beat the S&P 500 in 2013 and 2009.
A portfolio that is commonly regarded as one of the best active US funds for adding value is FE Alpha Manager Gordon Grender’s GAM North American Growth.
The £300m fund, which tends to invest in the lower end of the S&P 500, was a top quartile performer in 2012, 2011 and 2010. Nevertheless, it lagged behind the market in the recent rally and failed to rebound as strongly after the crash. As a result, it fell into the bottom quartile in 2013 and 2009.
It has, however, performed well in terms of capital protection.
Our data shows that it is top quartile for its maximum drawdown, downside risk and annualised volatility over the last five years and second quartile for its Sharpe ratio.
Also, GAM North American Growth was the best-performing fund in the sector in the crash year of 2008, with returns of 7.88 per cent, while the S&P 500 and sector average lost 13.39 per cent and 18.36 per cent, respectively.
Performance of fund vs sector and index in 2008
Source: FE Analytics
Although it was only launched in February 2009 and does not have a long enough track record to be eligible for this list, Legg Mason Capital Management Opportunity has dominated the IMA North America sector recently.
It is headed up by industry star Bill Miller, who famously outperformed the S&P 500 for 15 consecutive years between 1991 and 2005 when he managed the Legg Mason Capital Management Value Trust.
The fund, which is backed by Gavin Haynes and Ben Willis at Whitechurch due to Miller’s value approach, was the sector’s best performer in both 2012 and 2013.
Despite these returns, Legg Mason Capital Management Opportunity is only second quartile over three years, due to the fact it was the worst performing fund in the sector in 2011 with losses of 33.12 per cent.
