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31
DECEMBER 2011
[www.portfolio-adviser.com]
PORTFOLIO ADVISER
FUND SELECTOR
US EQUITY FUNDS
FUND ANALYSIS
Q
Neptune US Income Fund invests across North America, and aims
to generate rising levels of income with the potential for capital
growth predominantly through small and medium-sized firms.
Q
Rebecca Young has been managing the fund since launch in
autumn 2010, her first lead role having joined Neptune as an
investment analyst two years earlier (see pages 14-15).
SECTOR OUTLOOK
What is evident from this review is that the US market, due to its breadth and size, is a challenging
environment. However, in the past three years, growth styles with a heavy bias to IT have been in the
ascendant and we expect growth to continue to be the investors’ choice in the next 12 to 18 months.
As such, it is likely that funds shown may maintain their current levels of performance, or where
underperforming, will seek to allocate more cyclicality. We have also seen an increasing number
of funds that now hedge their dollar exposure back to sterling – a trend we expect to continue.
We invest in a broad range of funds within the US, so that we have a core holding with smaller
companies and IT as a separate allocation. It is our view that the US economy remains the key to any
global recovery, and we believe that the evidence for this is perhaps stronger than commentators wish to
report. What is clear is that despite the debt mountain, the US is at least in charge of its own destiny, and
the dollar will remain the reserve currency of choice for a lot longer yet.
Top ranked funds
Newcomers
FUND PICKER’S
COMMENT
PAUL STEVENS,
INVESTMENT MANAGER,
1ST PORT ASSET
MANAGEMENT
According to the IMF fig-
ures for 2010, US compa-
nies contributed the largest
proportion of global GDP
behind Europe.
A fear is that Europe’s
contribution to global GDP
will diminish going for-
ward, and that asset alloca-
tors will seek returns from
other regions. However,
the importance of allocat-
ing to the US should not be
ignored.
The JPMorgan US Equity
Income Fund has returned
7.7% on a total return basis,
outperforming its bench-
mark (S&P 500) over the
same period.
The fund is managed by
Clare Hart and aims to
achieve a yield of 1% above
its benchmark.
The team uses a bottom-
up fundamental analysis
approach and its philoso-
phy focuses on the ability
of companies to generate
consistent free cash flow.
The fund is well diversi-
fied and this, together with
its broad overweight to
other financials this year,
has secured its perform-
ance. It appears in the
Newcomers table, but in
fact, the strategy has been
running since 2002 in an
offshore vehicle.
The BNY Mellon US
Equity Fund, run by Walter
Scott & Partners in
Edinburgh, has achieved a
return of 9.6% over one
year within its sterling-
hedged share class.
The fund currently has a
zero weighting to finan-
cials (more importantly
banks), utilities and tele-
coms. It last had a modest
weighting to financials
back in 2009.
Avoiding banks and
overweighting IT has been
a positive contributor to
performance.
The UBS US Growth
Fund is the UK-domiciled
version of the Luxembourg
Sicav. Headed by Lawrence
Kemp, the team seeks to
outperform the Russell
1000 Growth Index by
300bps through a market
cycle.
The fund has benefitted
from its stock selection
within consumer discre-
Top funds – 3-year risk/return
Standard deviation (%)
Return (%)
2
To 24 Oct ’11. Source: Morningstar
2.5
3
3.5
2
4
6
8
10
Sector average
UBS US
Growth
Fund A Acc
Vanguard US
Equity Index Acc
Franklin US
Opportunities A Acc
Amundi ETF
Nasdaq-100-
€
CS ETF (IE) on Nasdaq 100
BNPP L1 Equity
High Div USA C C
Neptune US Income A Acc
JPM US Equity
Income A Acc
BNY Mellon US
Equity I £ Hdg
CS ETF (IE) on
Dow Jones
Industrial Avrg
-5
0
5
10
%
15
20
Nov
Aug
May
Feb ’11
Nov ’10
Source: Morningstar
S&P 500
CS ETF (IE)
on Nasdaq 100
Amundi ETF
Nasdaq-100-
€
BNY Mellon US Equity I £ Hdg
Top 3 performing funds vs indices
tionary, IT and industrials
which has added positive
alpha over the past year.
The fund has a large over-
weight relative to the
Russell Growth 1000 index
in IT.
The Franklin Templeton
US Fund uses the Russell
3000 Growth Index and is
run by Grant Bowers and
Conrad Hermann. This
fund has a large-cap,
growth-style bias and the
fund is overweight IT,
healthcare and industrials
with a slight underweight
in consumer discretionary
and consumer staples.
Top US equity funds with a track record of under 3 years, but more than 1 year
1-year
1-year
1-year
1-year 1-year
Fund
Launch
Domicile
% chg Alpha Beta
R²
volatility size (£m) date
BNY Mellon US Equity I £ Hdg
9.65
0.2
0.82
0.66 2.27
23.25
20 Nov ’09
Ireland
Amundi ETF Nasdaq-100-
½
9.48
0.33
0.61
0.82 3.16
56.06
8 Jun ’10
France
CS ETF (IE) on Nasdaq 100
9.47
0.33
0.61
0.82 3.17
156.39 26 Jan ’10
Ireland
JPM US Equity Income A Acc
7.73
0.58
0.89
0.79 2.19
382.96 15 Dec ’08
UK
UBS US Growth Fund A Acc
6.78
0.23
0.84
0.69 2.73
50.31
3 Nov ’08
UK
CS ETF (IE) on Dow Jones Industrial Avrg 6.15
0.22
0.8
0.94 2.43
37.08
26 Jan ’10
Ireland
Vanguard US Equity Index Acc
5.84
-0.08 1.1
0.99 2.79
248.67 23 Jun ’09
UK
Franklin US Opportunities A Acc
5.25
0.09
1.03
0.68 3.12
7.17
30 Jan ’09
UK
BNPP L1 Equity High Div USA C C
5.06
0.2
0.71
0.8
2.07
17.77
21 Nov ’08
Luxembourg
Neptune US Income A Acc
4.95
0.29
0.72
0.71 2.13
N/S
30 Sep ’10
UK
To 24 Oct ’11. Bid to bid, £, gross income, no cap. Source: Morningstar
The UBS US
Growth Fund is the
UK-domiciled version
of the Luxembourg
Sicav. Headed by
Lawrence Kemp,
the team seeks
to outperform the
Russell 1000 Growth
Index by 300bps
through a market
cycle
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