30
FUND SELECTOR US EQUITIES
Top ranked funds Assets under management
Top 10 funds – 3-year risk and return
Return (%)
30
20
10
Pioneer Funds
US Research
E € ND
Vanguard
US 500 Stk
Index Inv $
Axa Rosenberg
US Equity Alpha A
CH North
American
Eq Med L
FUND SELECTOR’S CHOICE
Sector avg
0
JPM US Dynamic
A (Dist) – $
iShares
SGAM Fund Eq
S&P 500 $
US Rel Val A
-10
2.5
3 3.5 4
Standard deviation
25 Jun ’07 – 23 Jun ’08. Bid to bid, $, gross income, no cap
Source: Morningstar
Top 10 funds by assets under management
6 Jun ’05 – 9 Jun ’08. Bid to bid, $, gross income, no cap. Source: Morningstar
William Buckhurst, fund of funds manager, Cheviot Asset Management
One of the ways fund management in the US differs from Europe is that most managers are clearly
differentiated as either ‘value’ or ‘growth’ investors. There is no right or wrong answer, and when it
comes to labelling individual stocks as either value or growth, there can be some disagreement for
those companies near the edge of either definition. But it is interesting to see that value funds make
up a significant part of the top ten largest funds.
One of the funds we like at Cheviot is the UBAM fund, which is outsourced to Neuberger & Berman
where Marvin Schwartz, who has been managing money for almost 50 years, is the lead manager.
Schwartz is one of the best known value investors in the US. Over his lengthy career, Schwartz has
developed a clear and decisive style targeting those companies with a quality management and business
model but that trade at a deep discount to the rest of the market.
Despite many value managers having come unstuck over the past year, Schwartz and his team continue
to beat the market: much of this return has come from a long-term overweight in the energy sector.
Top 3 funds by AUM vs index
%
40
30
20
10
0
3-year 3-year 3-year 3-year 3-year 3-year M’star Fund Dom
% chg Alpha Beta R² Sharpe volatility Ratings size ($m)
UBAM Neub Berman US Equity Value AC 26.23 0.17 1.07 0.58 0.11 3.62 ����� 2,646.16 Lux’bourg
BGF US Flexible Equity A2 $ 12.72 -0.22 1.14 0.74 0.02 3.43 ���� 2,377.38 Lux’bourg
iShares S&P 500 $ 12.63 -0.05 1 1 0.06 2.57 ���� 2,170.84 Ireland
Axa Rosenberg US Equity Alpha A 18.11 -0.02 1.11 0.91 0.09 3 ���� 1,499.98 Ireland
Vanguard US 500 Stock Index Inv $ 11.76 -0.08 1.02 1 0.05 2.62 ���� 1,245.76 Ireland
Pioneer Funds US Research E � ND 18.62 0.01 0.99 0.86 0.08 2.75 ��� 1,219.77 Lux’bourg
JPM US Dynamic A (Dist) – $ 9.71 -0.26 1.08 0.71 0 3.32 �� 1,203.9 Lux’bourg
SGAM Fund Equity US Relative Value A 0.53 -0.34 1 0.78 -0.05 2.92 ���� 1,159.45 Lux’bourg
Parvest USA C $ 17.28 -0.12 1.24 0.83 0.06 3.5 ���� 1,158.52 Lux’bourg
CH North American Equity Med L 13.01 -0.15 1.06 0.72 0.03 3.2 ��� 1,001.99 Ireland
BGF US Flexible Eq A2 $
The largest fund in this
group is also the best performer
over three years
and there or thereabouts in
each of the past three discrete
years.
UBAM’s Neuberger Berman
US Equity Value Fund
is a classic value product.
Marvin Schwartz, a 46-year
veteran of investment, typically
invests in companies
with a price-to-earnings
ratio of less than 12x. He
also looks for strong balance
sheets and high-quality
management.
UBAM Neub
Berman US
Eq Val AC
Parvest USA C $
BGF US Flexible
Equity A2 $
-10
iShares S&P 500 $
Jun ’05 Dec Jun ’06 Dec Jun ’07 Dec
20 Jun ’07 – 23 Jun ’08. Bid to bid, $, gross reinvested
Source: Morningstar
UBAM Neub Berman
US Equity Value AC
Although among the
more volatile of this group
– but none are particularly
so – the fund has nonetheless
delivered positive
alpha in a group where
only one other fund,
Pioneer US Research, has
done so over three years.
Schwartz looks for companies
he thinks are trading
at significant discounts
to the rest of the market.
Examples of current topten
holdings include IBM,
Oracle and Xerox in the
technology sector, as well
INTERNATIONAL ADVISER [www.international-adviser.com] AUGUST 2008
M’star North America
equity sector average
as News Corp in the consumer
sector.
l Favouring ETFs
It is interesting to see two
index funds in the top ten,
iShares S&P 500 and
Vanguard’s US 500 Stock
Index Fund.
That an iShares
exchange-traded fund
(ETF) launched five years
ago is the third-largest fund
in the offshore US equity
universe is testament to the
immense popularity and
growing use of these vehicles
for asset allocation.
In general, ETFs are
appearing more and more
frequently in this section of
the Fund Selector feature.
The worst performer by
some margin is the SGAM
US Relative Value Equity
Fund, which returned just
0.53% over three years. As
its name suggests, the
fund’s management seeks
to invest in stocks that are
undervalued by the market,
S&P 500
Jun ’08
but fund manager Diane
Jaffee has clearly failed to
achieve this.
The fund also earns the
distinction of being the
only one in the group with
a negative Sharpe ratio,
highlighting that any additional
risk as measured by
standard deviation from
the benchmark resulted in
a drop in the fund’s NAV.
l Reliable performers
Axa Rosenberg funds often
make it into both the largest
by assets under management
and the ‘top performance
over three years’
sections.
Its regular appearance
is down to the consistency,
capacity and success of its
quantitative screening process,
which is applied to all
its funds worldwide.
This involves an analysis
of published financial
data to uncover attractively
valued stocks, and a
second set of fundamentals
measures such as PE
ratios and investor sentiment
indicators to find
stocks with attractive forecast
earnings.
Outputs from both processes
are then combined
to identify the most attractive
stocks.
The fund featured here
– US Equity Alpha – is a
blend of large- and mid-cap
stocks. Its performance over
three years is reasonable
and over the past discrete
year, although negative, is
the pick of the bunch.
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.