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Top 100 Funds: North America (2 Funds)

Our pick of the best funds for exposure to North America
September 13, 2018

Active funds have struggled over the years to beat large mainstream US indices such as the S&P 500, and in most cases investors have been better off using a passive fund. However, there are a handful of funds that beat the index at least part of the time, and in other areas of the US market, such as smaller companies, more active managers are able to add value. 

FUNDS DROPPED: 

We have dropped HSBC American Index (GB00B80QG615) because this year we are only including active funds in the IC Top 100 Funds. There is nothing wrong with this fund, which is among the cheapest of passive funds tracking the S&P 500 index with an ongoing charge of 0.06 per cent. When we put together a list of suggested open-ended tracker funds later this year we may well include this one.

Fidelity American Special Situations (GB00B89ST706) had been outperforming the S&P 500 in each full calendar since current manager Angel Agudo took over in 2012, but last year made a negative return in contrast to 11 per cent for the S&P 500. And even though the fund outperformed in 2015 and 2016, this wasn’t by a great margin.

 

NEW ENTRANT: Artemis US Select (GB00BMMV5105)

Artemis US Select has achieved that rare feat that many US active funds fail to do: beat the S&P 500 index most of the time since its launch in 2014. And in the one year it did lag – 2016 – this was with a strong double-digit return of 26.6 per cent.

Manager Cormac Weldon also has a longer record of outperformance: he previously ran the Threadneedle American (GB00B7T2FK07) and Threadneedle American Select (GB00B7HJLD86) funds, the latter for over 12 years.During that time he beat the S&P 500 and the IA North America sector average with a return of 84 per cent, against 64 per cent and 51 per cent. He has over 20 years’ experience and has invested through many market cycles.

The fund typically holds 40 to 60 stocks, including some smaller and less mature companies that Mr Weldon and his team believe have superior long-term growth potential. The fund is mainly focused on large-caps but at the end of July had a quarter of its assets in mid-caps. At that point it had about a quarter of its assets in information technology, 17.1 per cent in healthcare and 16.5 per cent in industrial shares.

The fund’s management team takes a flexible approach to stockpicking, changing focus as the economic and market cycle changes with the aim of delivering returns in different conditions. And they pay as much attention to evaluating potential financial, market and economic risks as they do to investment opportunities.

 

JPMorgan US Smaller Companies Investment Trust (JUSC)

JPMorgan US Smaller Companies Investment Trust has a strong record of outperforming the Russell 2000 index of US smaller companies. The trust’s managers aim for growth by investing in US smaller companies that have a sustainable competitive advantage, strong management teams and trade at a discount to what they consider is their intrinsic value. They select holdings on the basis of their individual merits rather than according to sector or macroeconomic considerations.

“JPMorgan US Smaller Companies’ [NAV returns] have outperformed the Russell 2000 Index in every year since 2008 when management was transferred to the small-cap core team in New York, now headed by Don San Jose,” says Ewan Lovett-Turner at Numis Securities. “The trust is an attractive way to access a portfolio of quality US companies with resilient franchises and growth potential.”

 1-year total return (%) 3-year cumulative total return (%)5-year cumulative total return (%)Ongoing charge (%)Manager start date
JPMorgan US Smaller Companies Investment Trust (JUSC)28.3698.24126.611.33Don San Jose 2008, Dan Percella 2014, John Brachle 2017
NEW ENTRANT: Artemis US Select (GB00BMMV5105)25.8288.86na0.8419/09/2014
S&P 500 index16.3874.09111.47  
Russell 2000 index23.9183115.05  
Performance data: FE Analytics as at 31 August 2018. Figures for investment trusts are share price total returns.
‡ The history of this unit/share class has been extended, at FE’s discretion, to give a sense of a longer track record of the fund as a whole. Ongoing charge: fund provider unless otherwise indicated. Manager start date: fund provider/FE Trustnet unless otherwise indicated. *Morningstar. **Association of Investment Companies