Jake Moeller uses the Lipper Leaders scoring system to analyse the best performing funds in IMA North America sector.
REUTERS/Jo Yong-Hak
The importance of the U.S. market simply cannot be overlooked by a U.K. investor. Traditionally the U.S. has composed around 50% of the MSCI world index by weight and the fortunes of other world markets are invariably beholden to events there. North America is a heavily analysed market and obtaining an information advantage as an active fund manager is a particularly challenging undertaking. An institutional fund investor will have the resources to examine the detailed characteristics of a U.S. fund – style bias, portfolio composition, sector tilts etc and then interview the fund manager. A retail investor is unlikely to be able to undertake this level of due diligence and is thus faced with a difficult choice.
Table 1. 12 month spread of funds in the IMA North America sector to end of February 2014.
Source: Lipper, a Thomson Reuters company.
The funds included in the table are those with the best 3 year total returns in this sector. Including the Lipper Leaders ratings reveals that these funds have also delivered excellent Consistent Returns (risk-adjusted performance relative to their peers) over the last 5 years – this shows that they are able to add value of a longer period of time.
Table 2. Top Lipper Leader Rated Funds in the IMA North America sector
Source: Lipper, a Thomson Reuters company.
In this list you see a broad group of styles – Ian Heslop’s Old Mutual fund is a quantitative strategy with an inherent value bias. Peter Bye and Dan Neuger manage the UBS U.S. Growth Fund with a growth tilt. Threadneedle American Extended Alpha is a 130/30 type fund which allows shorting of stocks and JPM U.S. Equity Income aims to achieve an attractive yield from its portfolio. Despite these varied approaches, the important translation to out-performance is reflected in the strong Lipper Leader scores.
It is important to note that Lipper Leaders are calculated solely on quantitative inputs. Recently, Stephen Moore left Threadneedle with Neil Robson and Ashish Kochar now lead managers on the Threadneedle American Extended Alpha fund. A change in fund manager is a critical event that needs some qualitative evaluation by an investor. Any style changes that new managers bring to a fund need to roll through into longer term performance data before the Lipper Leader scores apply entirely to them.
A version of this article first appeared in MoneyFacts magazine.
