Weldon has been one of the best performing managers across the IMA North America and IMA North American Smaller Companies sectors in recent years, with his Threadneedle American, Threadneedle American Select and Threadneedle American Smaller Companies all comfortably beating their peers over five- and 10-year periods.
Source: FE Analytics
The American and American Select funds are also standout performers over a three-year period.
Stephen Moore, manager of the Threadneedle American Extended Alpha fund, is also leaving the group to join Artemis, which is launching a new US range for the duo.
Diane Sobin will take over from Weldon as head of US equities. She will also take sole responsibility of the small cap fund, which she has co-managed since April 2012, and American Select.
Nadia Grant, formerly of JP Morgan, will take over the American fund, while Ashish Kochar and Neil Robson will become co-managers of Threadneedle American Extended Alpha.
Both have a good track record versus their peers and Sobin has actually outperformed Cormac since she started running portfolios in 2011. However, neither Grant nor Sobin have as long or established track records as Cormac in the retail industry.
Some investors may be keen to follow the duo to Artemis, though the absence of a proven track record at the firm and the group’s relative inexperience in running US money may put many investors off.
Here are some possible alternatives to the highly rated Threadneedle funds, for anyone keen to jump ship.
Threadneedle American and Threadneedle American Select
The American and American Select funds are multi-cap portfolios. Though they invest the majority of their assets in large caps – Google and Apple are top-two positions for both, for example – Weldon has tried to add value by looking further down the market cap scale.
The funds are very similar, though the Select fund is more concentrated and has a slightly higher weighting to small and large caps.
The Threadneedle funds have a number of direct competitors, among which is the Old Mutual North American Equity fund. The fund has outperformed its sector and benchmark over one, three, five and 10 years, though returns have been particularly strong since the trio of Ian Heslop (pictured), Amadeo Alentorn and Mike Servent took over in December 2011.
FE data shows that the Old Mutual fund has returned 51.45 per cent over the period, putting it in the top-10 of its sector. The fund is also among the top performers over one, three and five years.
Performance of funds, sector and index since Dec 2011
Source: FE Analytics
Heslop and his team run a highly diversified portfolio of stocks across the market cap spectrum, with no one company accounting for more than 2 per cent of assets. The sector weightings in the fund are also very diversified, with areas such as consumer discretionary, financials and healthcare making up similar portions of the fund.
The top-10 is a mixed bag, with mega cap businesses such as Apple and Exxon combined with lesser known names such as McKesson and Cigna.
Old Mutual North American Equity has an OCF of 1.65 per cent, making it of equal expense to the two Threadneedle portfolios.
Other direct competitors include the £579m AXA Framlington American Growth fund, which is a favourite of Chelsea Financial’s Darius McDermott, as well as Neptune US Opportunities and FE Alpha Manager Jonathan Simon’s JPM America Equity portfolio.
Bill Miller’s Legg Mason Capital Management Opportunity fund is also a possibility. The fund, which is aggressively positioned, is by far the best performer in the North America sector over one year, with returns of over 50 per cent, though it doesn’t have as long a track record as the likes of Old Mutual and Threadneedle.
Weldon's emphasis on quality has led him to invest in a number of dividend-paying companies, which is often seen as a sign of financial strength. For anyone interested in equity income, JPM US Equity Income is another option.
The four crown-rated fund, which is also managed by Simon, has had a very strong three years and is top decile in its sector, with returns of 47.76 per cent. This puts it slightly ahead of the two Threadneedle funds, which have been significantly more volatile.
“The fund’s yield [2.33 per cent] is attractive and consistently reaches its target, but investors should know that it remains lower than that offered in Europe and the UK, although it may be more stable,” said the FE Research team, which includes the JPM fund in the FE Select 100.
JPM US Equity Income has ongoing charges of 1.68 per cent.
The American Extended Alpha fund uses both long and short positions, which is very unusual for a fund in the IMA North American sector. Anyone looking for an alternative may have to wait to see whether Artemis launches a similar product for the outgoing Moore.
Threadneedle American Smaller Companies
Along with Weldon, one of the biggest names on the US equity scene is FE Alpha Manager Gordon Grender, who has run the GAM North American Growth fund since 1985.
Although it sits in the IMA North American sector, FE analyst Charles Younes explains that the fund invests predominantly in small and mid caps, making it a possible alternative to the Threadneedle American Smaller Companies fund.
“Gordon Grender has been investing in US equities since 1974, meaning he has a wealth of experience in analysing companies, which is the main driver of the fund’s performance,” he said.
“He focuses on small- and medium-sized businesses as he believes this area of the market is under-researched, which presents opportunities. He prefers quality companies – that is, those with sound finances, an easy-to-understand development plan and shareholder-friendly management.”
Grender’s no-nonsense style has worked wonders for investors over the year. FE data shows the fund is well ahead of its sector and S&P 500 benchmark over the short-, medium- and long-term, though it hasn’t managed to keep up with the Threadneedle small cap fund over five and 10 years.
It has done much better over three years though, and has been consistently less volatile.
Performance of funds, sector and index over 3yrs
Source: FE Analytics
Grender tends to run a portfolio of around 40 names, and in the absence of worthwhile opportunities he does not hesitate to build up a cash position. He is currently sitting on 20 per cent cash because of concerns over valuations in the US, for example, which should please investors with a cautious stance.
“Despite the cash exposure, the fund has succeeded in outperforming its peers in rising markets; this highlights the manager’s excellent stockpicking skills. In the context of an overall portfolio, the fund’s unusual deviation from the US stock market should help to further diversify risk,” Younes added.
GAM North American Growth has ongoing charges of 1.64 per cent, making it slightly cheaper than the Threadneedle fund, which charges 1.71 per cent.
Other possible alternatives to Threadneedle American Smaller Companies include Legg Mason Royce US Small Cap Opportunity, which is a favourite with FE Alpha Manager David Coombs, as well as Schroder US Mid Cap. Cormac has traditionally invested in small and mid caps, so the Schroders fund again isn’t a direct comparison; the FE Research team still rates it highly though, including it in the FE Select 100.
The fund has failed to keep up with the rally in US small caps in recent years due to its generally cautious stance, but the team is pleased manager Jenny Jones is making an effort to adapt.
The team commented: “Last year’s performance was disappointing and manager Jenny Jones spent some time analysing the reasons why: too many steady eddies, a large cash allocation and a few stock-specific errors saw the fund return half the sector average.”
“The decisions following Jones’ analysis did not impact the portfolio to a great extent but brought more confidence among the team. There is a willingness to downsize the portfolio and increase the size of each holding to make every stock decision count for more.”
Schroder US Mid Cap has ongoing charges of 1.66 per cent. Jones also runs a small cap portfolio, though it is closed to new money.
