Threadneedle funds shrug off US downgrade
On the anniversary of Standard & Poor’s downgrade of the US credit, FE Trustnet takes a closer look at the funds which coped the best.
Threadneedle American Extended Alpha
and Threadneedle US Equity Income have performed the best in the last year and look well positioned to profit from an uptick in the US economy, the latest FE Trustnet research shows.
On 6 August 2011, rating agency Standard & Poor’s surprised the investment world by stripping the US of its coveted AAA credit rating following what it called ‘political brinkmanship’ over the decision to raise the debt ceiling.
The downgrade, coupled with escalating fears in the eurozone, sent markets into freefall, wiping billions off investor returns practically overnight, setting the stock markets back 12 months.
Despite the tough investment environment, the US has remained one of the most robust places to invest. With a return of 16.11 per cent, data from FE Analytics
shows IMA North America
has performed better than any other sector in the last twelve months.
In a heavily researched market which is notoriously difficult to add value, Threadneedle has been the stand-out house since the downgrade.
Over one year the group’s American Extended Alpha and US Equity Income strategies have posted returns of 21.63 per cent and 20.37 per cent respectively.
Performance of funds versus benchmark over 1 yr
Source: FE Analytics
The American Extended Alpha fund, launched in October 2007, is also top quartile over three years with a return of 61.12 per cent.
The strong showing saw the fund replace the Schroder US Mid Cap
fund in the aggressive portfolio in the FE Adviser Fund Index at the latest rebalance earlier this month.
It is headed-up by FE Alpha Manager Stephen Moore
, who was highlighted in a recent FE Trustnet study as having one of the highest Sharpe ratios
of any fund manager over the last three years.
The ratio measures a fund’s return relative to a notional risk-free investment – in this case, cash. The difference in returns is then divided by the fund's volatility.
Moore has an overweight in consumer products and financials and lists S&P 500 giants Apple and Exxon Mobil in the fund’s top-10 holdings.
The £308m fund’s minimum investment is £2,000 and its total expense ratio (TER) is 1.64 per cent.
Threadneedle US Equity Income, managed by Diane Sobin
, is one of only a handful of products which aims to profit from investing in companies with strong or rising dividend yields.
US companies have traditionally favoured share buybacks but dividend strategies are beginning to be more widely adopted as managers look to satisfy investors’ craving for income as stock markets remain volatile.
A year of decent stock market returns and an improving economy give the impression that the S&P downgrade was little more than a damp squib. The fiscal cliff remains a big threat to investors and is unlikely to go away any time soon, but it’s become an increasingly popular region for global managers to park their cash in recent months.
This week, much better-than-expected nonfarm payroll data has given a huge lift to the global economy. Presidential election years also tend to bring extra spending and stimulus measures – another reason why some invested in the region are particularly optimistic at present.