Amundi SICAV II Pioneer US Fundamental Growth, Pimco GIS Stocks Plus and T. Rowe Price US Smaller Companies Equity have all managed to outperform the S&P 500 while remaining top quartile for volatility, according to research by FE Trustnet.
When looking at the key economic indicators, it goes without saying that the US economy has boomed under Trump.
The country’s GDP grew at a pace of 3.5 per cent in 2018’s third quarter –matching the Trump’s administration goals, with unemployment at record lows and, wages are rising at their fastest rate since 2009.
Stock markets haven’t disappointed either. The S&P 500 continued to rise in 2017, helped by Trump’s business-friendly policies, such as a package of tax reforms aimed at reducing the burden on domestic companies.
Markets were helped too, by relatively benign conditions absent of too much volatility. As shown below by the CBOE SPX Volatility VIX – the so-called Wall Street ‘fear gauge’ – volatility was relatively subdued in 2017.
Performance of index in 2017
Source: FE Analytics
This year has proved more challenging for investors, however. The US market has seen two sell-offs so far, the most recent triggered by concerns over a faster-than-anticipated rate-hiking cycle.
Although the S&P 500 remains the top performing markets so far, some experts claim that US market vulnerability is beginning to rear its head and have therefore started to reposition.
With US president Trump claiming much of the credit for the strong performance of markets during his administration, FE Trustnet decided to find out which US funds have outperformed the S&P 500 while enjoying a smooth ride since Trump was elected in November 2016.
Over the two years to last month-end, the S&P 500 has delivered a 25.31 per cent total return with a volatility of 9.36 per cent.
Funds in the IA North America and IA North American Smaller Companies sectors have delivered an average return of 22.62 per cent. They have done so with a less-of-a-smooth ride, as the average volatility of 10.8 per cent for the funds in these two sectors shows.
Below, we take a look at the three active funds that have managed to outperform the blue-chip index over the last two years while remaining top quartile for volatility.
Amundi - SICAV II - Pioneer US Fundamental Growth
Although benchmarked against the Russell 1000 Growth, for the purposes of the article we have decided to compare the offshore Amundi SICAV II - Pioneer US Fundamental Growth against the S&P 500, a commonly-used index for US equity investors.
Data from FE Analytics showed that the fund has managed to outperform the blue-chip index but has been slightly more volatile than the benchmark.
The €120.8m fund has delivered a 27.77 per cent total return (to last-month-end) over the last two years and has had a volatility of 9.38 per cent.
Overseen by Paul Cloonan and Andrew Acheson, the fund’s biggest allocation by sector is to IT, healthcare and consumer discretionary.
Performance of fund vs S&P 500 and sector over 2yrs
Source: FE Analytics
Some of its main holdings include multinational technology companies Apple, Microsoft and Alphabet. Its top-10 holding accounts for almost 50 per cent of the portfolio.
The fund has an ongoing charges figure (OCF) of 0.92 per cent.
Pimco GIS Stocks Plus
The next fund on our list is the $2.7bn Pimco GIS Stocks Plus fund, a strategy with a different investment approach to equity investing.
Overseen by Mohsen Fahmi, Bryan Tsu and Jing Yang, the fund offers potential excess returns over equities that are uncorrelated with active equity managers by employing a bond portfolio.
The managers replicate the S&P 500 performance through equity index futures or total return swaps.
Data from FE Analytics shows Pimco GIS Stocks Plus has delivered a total return of 27.65 per cent over two years compared with a 24.75 per cent gain for the average fund in the IA North America sector and a gain of 26.79 per cent for the S&P 500 index. The fund has done so with a volatility of 9.47 per cent.
The fund has an OCF of 0.55 per cent.
T. Rowe Price US Smaller Companies Equity
Ryan Burgess oversees the final strategy that has managed to outperform the S&P 500 over the last two years while remaining top quartile for volatility.
The $1.6bn T. Rowe Price US Smaller Companies Equity fund aims to increase the value of its shares over the long term through growth in the value of its investments.
The fund is overweight industrials & business services and information technology compared to its benchmark, the Russell 2500.
Its top holdings are insurance brokerage and risk management services firm Arthur J Gallagher, natural gas distributor Atmos Energy, Bright Horizons Family Solutions and BWX Technologies, a supplier of nuclear components and fuel to the US government.
Performance of fund vs S&P 500 and sector over 2yrs
Source: FE Analytics
Over two years, T. Rowe Price US Smaller Companies Equity has delivered a total return of 27.79 per cent compared with a 29.14 per cent gain for the average fund in the IA North American Smaller Companies sector and a gain of 26.79 per cent for the S&P 500 index.
Over that time, the fund has had a volatility of 10.31 per cent.