Top ranked funds Newcomers
The average return for
newcomers over the past
year is a loss of nearly 10%
but at least all the funds in
the top ten have managed
to generate positive growth,
even if this increase is in
single digits.
The Pictet US Equity
Selection Fund is a largecap
growth-style product, a
strategy that has been in
favour over the past 12
months or so. It is run by
screening for stocks with
high returns on capital and
equity, and holds a portfolio
of 45 to 60 stocks (see
William Buckhurst’s fund
selector’s comment below
for more on this fund).
l On safe ground
Many of the funds in this
group have large-cap
growth biases, including
the Ikano US Growth,
Goldman Sachs US Blend,
Amex US Dynamic and the
HSBC and Lehman funds.
Craig Heron, co-head of
New Star’s funds of funds
team, says that style bias
appears to be sound for
the time being, but over
the longer term a more
defensive positioning
should be taken for investors
with US exposure.
“Our models are showing
that large-cap growth
is still the preferred style
to invest in the US,”
he remarks.
“This tends to be the
predominant style when
entering a stage of earnings
deceleration, because
earnings are scarcer and
you have to pay a premium
in order to buy into
those earnings.”
l Sector bounce
Heron has even been raising
US exposure in the
short term in the expectation
of a market rally. But
he does not believe that it
will endure.
He says: “We are expecting
a snap-back rally and
the signs are this is happening,
with the financial
sector in the US rising 13%
yesterday (16 July) from its
high oversold levels.
“In terms of funds, we
have bought Legg Mason
US Value. This is interesting
because the fund has
been absolutely dreadful –
having been outstanding
for a number of years and
leading to everyone holding
up Bill Miller as some
sort of messiah of fund
managers. For the past two
years – 2006 and 2007 – it
has been poor and it has
also underperformed this
year so far.
“But you might get a
pretty decent bounce from
the lows of the S&P. The
types of stocks held by
Miller are those that
have been savagely derated,
such as financials
and builders; they have
been really unloved by
the market.
“So if there is going
to be a bounce-back rally
that is a fund that should
really benefit.
Top 10 funds with less than a 3-year but at least a 1-year track record
25 Jun ’07 – 23 Jun ’08. Bid to bid, $, gross income, no cap. Source: Morningstar
“But if that happens
and afterwards the market
returns to similar conditions,
it will not be a fund
that you want to continue
to hold.”
l Taking a new tack
Heron says he has begun
researching US funds that
are likely to hold up better
than most if, as expected,
the US falls into recession
or there is a period
of protracted below-trend
growth. He says the type
of funds New Star’s system
is flagging up as potential
holdings in a bear market
are the likes of GAM Star
America, run by Gordon
Grender, because the manager
tended to hold high
cash weightings.
According to Heron,
other funds that might be
good for their defensive
qualities are Baillie Gifford
US and Neptune US, the
latter tending to have a
high weighting in pharmaceutical
stocks.
FUND SELECTOR’S CHOICE
William Buckhurst, fund of funds manager,
Cheviot Asset Management
Pictet dominates in this space, with its US offerings taking first and
second place over the past year. The management of the funds is
outsourced to Daniel Becker and Philip Sanders of Waddell & Reed
Investment Management. Waddell & Reed, founded in 1937, is one
of the oldest asset management companies in the US and has total
assets under management of nearly $65bn.
The funds are relatively concentrated with about 45 holdings.
The managers traditionally have a growth style and focus on
bottom-up stock selection. But the funds currently have overweight
positions in IT and healthcare which – despite traditionally being
seen as growth sectors – the managers argue are in fact now
showing value characteristics.
1-year 1-year 1-year 1-year 1-year 1-year Launch Fund Dom
% chg Alpha Beta R² Sharpe volatility date size ($m)
PF (Lux) US Equity Select – HP Cap € 26.37 0.63 0.79 0.51 0.13 2.79 29 Jun ’06 831.71 Lux’bourg
PF (Lux) US Equity Select – P Cap 9.23 0.35 0.81 0.74 0.03 2.37 29 Jun ’06 844.33 Lux’bourg
Robeco US Mid Cap Equity DH € 7.3 0.27 0.46 0.14 0.01 3.1 16 Oct ’06 5.79 Lux’bourg
Amex Epic US Dynamic Equity AU 6.73 0.22 0.46 0.55 0.02 1.56 18 May ’07 16.66 Lux’bourg
JOHCM US Opportunities $ Retail 4.27 0.11 0.09 0.02 -0.01 1.62 31 Mar ’06 26.13 Ireland
HSBC IS US Large Cap Growth I 3.67 0.27 0.92 0.88 -0.01 2.46 5 Oct ’05 0.54 Ireland
IKANO US Growth Fund M 1.36 0.23 0.92 0.73 -0.03 2.7 30 Nov ’05 18.82 Lux’bourg
Ashburton Americas Equity PC£ 1.18 0.14 0.47 0.2 -0.03 2.64 1 Dec ’06 12.07 Jersey
Lehman US Large Cap Growth $ B Acc 0.81 0.18 0.79 0.85 -0.04 2.16 13 Jun ’06 61.64 Ireland
GS US Blend Equity Portfolio Base Inc 0.24 0.16 0.71 0.66 -0.04 2.19 3 Feb ’06 12.54 Lux’bourg
AUGUST 2008 [www.international-adviser.com] INTERNATIONAL ADVISER
FUND SELECTOR US EQUITIES
Top 10 newcomers – 1-year risk and return
Return (%)
Top 3 newcomers vs index
%
30
20
10
30
20
10
0
0
PF (Lux) US
Eq Sel – P Cap
-10
Robeco US Mid
Cap Equity DH €
-20
M’star North America eq sector avg
Jun ’07 Aug
Oct
Dec
Feb ’08 Apr
Jun
25 Jun ’07 – 23 Jun ’08. Bid to bid, $, gross reinvested
Source: Morningstar
PF (Lux) US Equity Sel – HP Cap €
Amex Epic US
Dynamic Eq AU
Lehman US Large
Cap Gth $ B Acc
PF (Lux) US
Eqty Sel-P Cap
-10
GS US Blend Eq
Ashburton Americas Equity PC£
P’folio Base Inc
JOHCM US
Opport $ Ret
Sector avg
-20
1.5
2 2.5 3 3.5
Standard deviation
25 Jun ’07 – 23 Jun ’08. Bid to bid, $, gross income, no cap
Source: Morningstar
PF (Lux) US Eq
Sel – HP Cap €
HSBC IS US
Large Cap
Growth I
Robeco US Mid
Cap Equity DH €
Ikano US Growth Fund M
S&P 500
29
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