Fund selectors reveal their top US picks

A quartet of top asset allocators reveal their favourite US funds.

Gavin Haynes, managing director, Whitechurch Securities

Being the most highly researched and thus most efficient of global stockmarkets, the US is notoriously difficult for active fund managers to consistently outperform. As a result for investors seeking a core exposure to the US market a low cost passive option is worth considering. The iShares S&P 500 is a solid choice for investors looking to go down the ETF route.

However, there are active US funds that I believe merit a place in a portfolio. Equity income investing is at the core of Whitechurch’s investment philosophy and we have been investing in the JPM US Equity Income fund. It was launched in the UK in 2008 though it mirrors a US fund that has been running for over eight years (also managed by Clare Hart and Jonathan Simon).

The portfolio is focused on mid to large cap stocks and only those whose dividend yield is greater than the S&P 500. It provides exposure to a relatively untapped region for equity income for UK investors and, as such, it is an excellent diversifier.

Neptune US Opportunities has provided a strong record of outperformance since Felix Wintle (pictured) took over in 2005. The fund follows Neptune’s broader investment philosophy of identifying the big themes and backing the selected areas with conviction.

The investment process starts with top-down global sector views to identify areas offering the best opportunities, the manager will then select companies he believes are market leaders and can grow more profitably or at a faster rate. This fund offers investors a high conviction, very active exposure to US equity markets.

Emma Bilson, investment analyst, City Asset Management

Our active North American exposure is primarily sourced through two funds; the Findlay Park American fund and the Brown Advisory American fund. A consistent performer, the Findlay Park fund has been a core holding within our client portfolios for a number of years.

The team, led by James Findlay since its inception in 1998, are value-driven stock selectors and seek to invest in good quality, cheap stocks with little or no leverage. They are also cognisant of the macro environment in their decision-making something we feel is important even for bottom-up driven managers.

Brown Advisory is a recent addition to our portfolios. The firm is a Baltimore-based investment manager with an asset base firmly rooted in its private client business. We tend to favour these boutique investment groups as we feel their investment philosophy is more akin to our clients’ objectives.

The fund is an all cap, multi-strategy fund combining Brown’s US value, growth and smaller companies portfolios. We feel this provides our clients with the best exposure to the US market as it is unrestricted in market capitalisation or style bias.

Another advantage of both these funds is they offer sterling hedged share classes. This allows us the flexibility to gain exposure to the dollar or hedge it back into sterling depending on our in-house view on currency. We believe this is important in an environment where currencies have had a significant impact on returns.

Chris Mayo, investment director, Fund Intelligence

Threadneedle’s American fund is a well managed core vehicle that targets outperformance under most market conditions with a reduced level of volatility. The manager, Andrew Holliman, has met this objective over one, three and five years. The fund has no particular style bias and reflects the managers best stock and sector ideas.

Schroders’ US Mid Cap fund is managed by Jenny Jones (pictured), a very experienced US-based manager. This fund offers a mid and small cap portfolio using both a bottom up qualitative and quantitative process. The fund looks to invest in a combination of companies with superior growth, steady growers and turnaround stocks.

The fund has consistently outperformed its peers every year since Jones took over. Unfortunately the fund has recently soft closed to new business.

We like the JPM US Equity Income fund because unlike many of its peers, it offers a yield – currently 2.33% – which is ahead of the benchmark’s yield. There are a lot of good companies in the US that offer a growing dividend and this fund will allow access to them. It is managed by Clare Hart and Jonathan Simon who are part of a large and well resourced team.

Adrian Lowcock, senior investment adviser, Bestinvest

To add value in the US and get exposure to the world’s largest smaller companies market we like a multi-cap fund such as M&G American and in manager Aled Smith (pictured) we found a value investor with the freedom to express his views.

The fund also gives me exposure to global brands which I believe will benefit from growth in the East, but with the management expertise of an established US company.

The Martin Currie North American fund is a focused stock picking fund that invests in large cap growth stocks with some exposure to mid cap companies. The manager prefers individual stock selection over sectors and uses the in-house Dynamic Stock Matrix that aims to identify mis-priced stocks with improving fundamentals. The stock selection process is then overlain with views on economic and industry trends.

The Legal and General US Index Trust tracks the performance of the FTSE World USA Index (which has 600 constituents) using a combination of replication and stock sampling techniques. Currently, the portfolio is large enough that it contains all stocks from the benchmark except for the smaller cap stocks.

The index has very similar performance characteristics to the more widely known S&P 500 index. Charges are low and Legal and General have a good name in the tracker space.