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The US equity funds that advisers say investors of any age can hold

18 January 2018

FE Trustnet highlights several funds in the IA North America sector that have won a place in all FE AFI portfolios.

By Gary Jackson,

Editor, FE Trustnet

Index trackers from Vanguard and L&G as well as US active funds managed by Artemis, Miton and Schroders could be appropriate for investors of almost any age, according to financial advisers.

This is down to the fact that they are the only IA North America funds to be found in all three FE Adviser Fund Index (FE AFI) portfolios, a range of portfolios for investors of different risk profiles.

The FE AFI Aggressive portfolio contains funds that the panel thinks could be suitable for an investor in their late 20s, FE AFI Balanced holds funds for a person in their mid 40s and FE AFI Cautious is made up of funds for those in their late 50s. These selections assume the investor is saving for a pension at 65.

In this article, we find out which funds from the IA North America sector could be owned by investors of most ages given the fact they are found in the aggressive, balanced and cautious AFI portfolios.

 

Artemis US Equity

First up is the £30.2m Artemis US Equity fund, which has been managed by Cormac Weldon since its launch in September 2014. Before joining Artemis in 2014, Weldon had been at Columbia Threadneedle for around 17 years and was head of the firm’s North America team.

Since launch, the fund has made a 75.72 per cent total return which ranks it in the IA North America sector’s top quartile; it has also outperformed its S&P 500 benchmark. The fund is top quartile over one- and three-year periods.

Performance of fund vs sector and index since launch

 

Source: FE Analytics

Just over three-quarters of the portfolio is held in large-cap stocks, with names such as Google parent company Alphabet, tech giant Microsoft and e-commerce leader Amazon being its largest holdings. It also has 22.1 per cent in mid-caps and 0.8 per cent in small-caps.

As suggested by its top holdings, information technology is the portfolio’s biggest sector bet and accounts for 29.8 per cent of assets. Some 15.1 per cent is in healthcare and 14.7 per cent is in financials.

Artemis US Equity has an ongoing charges figure (OCF) of 1 per cent.


LF Miton US Opportunities

Hugh Grieves and Nick Ford’s £380.5m LF Miton US Opportunities fund is another that the AFI panel suggests could be held by investors of most ages. It has made a 115.90 per cent total return since launch, placing it in the sector’s top quartile; it has also beaten the S&P 500, although this is not the fund’s benchmark.

In his latest outlook, Ford said he believes US companies will continue to perform well over 2018: “We expect further gains in US company shares over the coming year as the economic fundamentals supporting the rising stock market remain firmly intact.

Performance of fund vs sector and index since launch

 

Source: FE Analytics

“The next leg up in US company shares should be driven by company earnings with the leadership baton shifting from the technology sector to domestic companies that sell discretionary items to consumers, such as household furnishings, where a connection to an acceleration in economic activity is the greatest.”

In keep with this view, 22.4 per cent of the portfolio is in consumer discretionary stocks, making it the largest sector allocation. It also has 19.2 per cent in financial stocks and 19 per cent in industrials.

LF Miton US Opportunities has a 0.84 per cent OCF.

 

L&G US Index Trust

A passive offering is the next IA North America member to be included in all three AFI portfolios. The L&G US Index Trust tracks the performance of the FTSE USA index.

As would be expected, the £3.8bn tracker has lagged its benchmark over all time frames. However, it has outperformed the average IA North America fund over one, three, five and 10 years; over the past decade, the fund’s 237.60 per cent total return has been close to 50 percentage points higher than its average peer’s gain.

Performance of fund vs sector and index over 10yrs

 

Source: FE Analytics

In keeping with the index, the portfolio is overwhelmingly made up of large-cap US stocks, with technology, financials and healthcare being the biggest sector allocations. The largest individual positions are Apple, Microsoft, Alphabet, Amazon and Facebook.

L&G US Index Trust has a 0.10 per cent OCF.


 

Schroder US Mid Cap

FE Alpha Manager Jenny Jones has run the £2.1bn Schroder US Mid Cap fund since April 2005, over which time it has made a top-decile 412.66 per cent total return. It has also beaten its average peer and benchmark over three, five and 10 years but is lagging over the past 12 months.

Jones invests in three types of companies: mispriced growth, or those with a valuation that underestimates growth potential; ‘steady Eddies’, or firms with stable and predictable earnings; and turnarounds, which are distressed but have the potential to improve.

Performance of fund vs sector and index under Jones

 

Source: FE Analytics

Analysts at FE Invest, who have included the fund on their Approved List, said: “Although the portfolio is not officially constrained by a benchmark, it is unlikely that the fund will have extreme over- or underweights relative to the market benchmark.

“This can be seen as both a negative and a positive: not taking big bets may hamper returns should the team’s in-depth research be correct but it also means the fund is less likely to lose more than the index in poor periods. This means the fund could work as a core allocation to US equities and the US economy despite its mid-cap focus.”

Schroder US Mid Cap has an OCF of 0.91 per cent.

 

Vanguard US Equity Index

The final IA North America fund that could be appropriate for investors of most ages is Vanguard US Equity Index, another index tracker. Vanguard is one of the leaders in the passive fund space.

The £4.9bn fund tracks the S&P Total Market index and this means its largest sector weightings are to information technology, financials and healthcare. It also means that Apple, Microsoft, Alphabet, Amazon and Facebook are its largest positions.

Performance of fund vs sector since launch

 

Source: FE Analytics

Since launch in 2009, the fund has generated a 327.26 per cent return and is in the sector’s top quartile by a decent margin. It’s also ahead of its average peer over three- and five-year periods.

Vanguard US Equity Index has a 0.10 per cent OCF.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.