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PORTFOLIO ADVISER
[www.portfolio-adviser.com]
DECEMBER 2011
FUND SELECTOR
US EQUITY FUNDS
US equity funds
FUND PICKER’S
COMMENT
PAUL STEVENS,
INVESTMENT MANAGER,
1ST PORT ASSET
MANAGEMENT
In recent years, when dis-
cussing US funds with col-
leagues, the conversation
has often turned to how
difficult it is to find actively-
managed funds that deliver
consistent performance.
The result has been that
portfolio managers have
increasingly used passive
strategies, and it is there-
fore of little surprise that
our historic observations
have been borne out by
the performance of the
three ETFs in the perform-
ance table.
But to leave it there
would be too simple; while
passive strategies have their
place in any well-managed
portfolio, you do not want
to follow the market when
it is going down. That is
why, in our opinion, active
managed funds are as
important as ever.
A key observation of
the funds listed is that, in
Top ranked funds
3-year performance
We analyse the best, newest and biggest US equity funds. Commentary from Paul
Stevens, investment manager, 1st Port Asset Management
Top funds – 3-year risk/return
Standard deviation (%)
Return (%)
4
To 24 Oct ’11. Source: Morningstar
5
6
7
8
40
60
80
100
Sector average
Wells Fargo
(Lux) WF-US
All Cp Gr A$ Acc
Lyxor ETF
Nasdaq-100 A
MS INVF US
Growth A $
iShares
Nasdaq-
100 (DE)
PowerShares EQQQ Fund
Threadneedle Amer
Sm Cos Ret Net Acc
Janus US
Venture I $ Dis
LM Royce
Smlr Coms
A Inc (A) $
Vanguard US
Opportunities Inst $
Vanguard US
Discoveries Inv Acc
Top 3 performing funds vs indices
-30
0
30
60
90
120
%
150
Oct
Apr ’11
Oct
Apr ’10
Oct
Apr ’09
Oct ’08
Source: Morningstar
S&P 500
Janus US
Venture I $ Dis
Wells Fargo (Lux)
WF-US All Cp Gr A$ Acc
PowerShares
EQQQ Fund
the main, they are invested
in Nasdaq 100 companies
or have a small and mid-
cap bias to their portfolios.
In the past three years this
has been very helpful to
their performance when
viewed against broader
indices.
It is equally important to
note that the funds, both
active and passive, have
avoided large exposure to
financials. The decision to
allocate money to this area
Top 10 US equity funds by 3-year performance
3-year
3-year
3-year
3-year 3-year
Morningstar Fund
Domicile
% chg Alpha Beta
R²
mth vol Rating
size (£m)
PowerShares EQQQ Fund
99.14 0.79
0.98
0.83 5.43
+++++
600.52
Ireland
Wells Fargo (Lux) WF-US All Cp Gr A$ Acc 97.87 0.98
0.82
0.7
4.89
+++++
97.83
Luxembourg
Janus US Venture I $ Dis
96.43 0.73
1.1
0.81 6.15
+++++
13.76
Ireland
iShares Nasdaq-100 (DE)
94.85 0.92
0.9
0.73 5.33
+++++
N/S
Germany
MS INVF US Growth A $
94.62 0.84
0.84
0.64 5.3
++++
768.31
Luxembourg
Vanguard US Discoveries Inv Acc
91.66 0.61
1.33
0.83 7.31
++++
5.99
Ireland
Lyxor ETF Nasdaq-100 A
89.92 0.86
0.92
0.79 5.23
+++++
166.06
France
Vanguard US Opportunities Inst $
87.98 0.45
1.21
0.87 6.56
+++++
476.4
Ireland
LM Royce Smlr Coms A Inc (A) $
85.95 0.34
1.16
0.79 6.54
+++
368.37
Ireland
Threadneedle Amer Sm Cos Ret Net Acc
84.75 0.75
0.96
0.71 5.73
+++++
313.46
UK
FUND ANALYSIS
Q
Co-managed by Chad Meade and Brian Schaub, the Janus US
Venture Fund seeks to invest in small companies with recurring
and repeat revenues that are poised for long-term growth.
Consumer stocks, both cyclical and non-cyclical, make up more
than half of the fund’s investments, while it also has a fair share
in technology and industrials.
of the US market confirms
the importance of asset
allocation within geograph-
ical regions, as supported
by the much lower total
return delivered from the
broader based S&P 500
index over the period.
Narrower in scope, the
Nasdaq 100 index increased
by 97.2%, and indeed it
could be argued that a
comparison (in particular
with the passive strategies)
may be more informative if
viewed against specialist
technology funds.
The decision to invest
into a particular market seg-
ment, rather than look for
generalist US exposure, has
to be taken with care and it
is evident that funds such
as the Threadneedle Ameri-
can Smaller Companies,
Royce Smaller Companies
and the passive strategies
will provide good returns in
appropriate market condi-
tions. However, things can
get a little bumpy when
growth is out of fashion.
Therefore the true suc-
cess in the group has to be
the Wells Fargo US All Cap
Growth Fund, which is
benchmarked
against
the Russell 3000 Growth
Index. It has delivered a
strong performance while
investing approximately
50% in the mega and large
cap stocks. The team has
maintained its 30-year old
investment philosophy to
seek out sustainable growth
stocks, coupled with a strict
sell discipline, even when
their style perhaps looks
out of favour.
To 24 Oct ’11. Bid to bid, £, gross income, no cap. Source: Morningstar