Large cap and equity income US funds performed best over the first half of the year, with some outperforming US markets by more than 30 percentage points.
The top-performing fund was Sanlam’s £5.8mn Centre American Select fund, which returned 8.95 per cent in the period, according to data FTAdviser has analysed from Morningstar.
This is compared with the Nasdaq, which dropped 29.4 per cent in the first half of the year, and the S&P 500 crashed 21 per cent.
US stocks overall recorded their worst first half of the year in 50 years, according to the Financial Times.
Top 10 best performing US funds
Fund | Sector | Size | Return FY 2022 |
Sanlam Centre American Select | US Large-Cap Blend Equity | £5.8mn | 8.95% |
EDRF US Value | US Large-Cap Value Equity | £363mn | 8.33% |
GQG Partners US Equity | US Large-Cap Blend Equity | £561mn | 8.00% |
DWS Invest CROCI US Dividends | US Large-Cap Value Equity | £232mn | 4.88% |
BNY Mellon US Equity Income | US Equity Income | £263mn | 4.76% |
Quilter Investors US Equity Income | US Equity Income | £213mn | 2.78% |
Fidelity America A | US Large-Cap Value Equity | £2.9bn | 2.36% |
Cullen US Enh Equity Income | US Equity Income | £65mn | 2.27% |
Fidelity American Special Situations | US Large-Cap Value Equity | £709mn | 2.20% |
Invesco US Value Equity | US Large-Cap Value Equity | £164mn | 1.68% |
Source: Morningstar
Markets dived in the first few months of the year as rising inflation led to fears of interest rate rises.
When it became clear that inflation was not as transitory as central bankers thought it might be, and the Fed signalled a number of rate hikes on the horizon, markets travelled decidedly lower.
The US markets have been particularly hit due to their large exposure to growth tech stocks, which have suffered in the rotation towards value companies.
Equity income and large cap funds will have been partially sheltered from these falls, as growth stocks tend to be smaller caps.
Nick Wood, head of fund research at Quilter Cheviot said it has been a “torrid time” for most investors with both equities and bonds seeing significant declines.
“It was no different in the world of investment funds, where only 6 per cent of all funds in the Investment Association funds universe managed to register a positive return in sterling terms in the first half of the year,” he said.
The biggest fund in the top 10 is Fidelity’s £2.9bn America Fund, which returned 2.36 per cent in the period.
Indeed, tech and US funds filled the 10 worst-performing funds in the IA sector, including Baillie Gifford’s American fund, which lost nearly 50 per cent.
Despite these drops, UK investors have continued to plug their money into North American funds.
Although January this year saw redemptions of £722mn, each month since then has seen net investment, with £444mn flowing in through May.
The 10 worst-performing funds in IA universe FY 2022
Fund | Total return FY 2022 | |
T. Rowe Price Global Tech Equity | -45.43 | |
T. Rowe Price Global Tech Equity | -46.84 | |
Morgan Stanley US Advantage | -47.79 | |
Fidelity Emerg Europe Mid East&Africa | -48.72 | |
Morgan Stanley Global Insight | -48.93 | |
Baillie Gifford American | -49.10 | |
MS INVF US Advantage | -49.44 | |
Nikko AM ARK Disruptive Innovation | -52.08 | |
MS INVF US Growth | -52.51 | |
Liontrust Russia | -53.08 | |
Source: Morningstar, Quilter Cheviot as at 30/6/2022
Fund managers have urged investors to look past large caps, however, saying a “forgotten quality” of the US market is the breadth and depth of small caps.
When it comes to large-cap US stocks, the likes of Colgate-Palmolive, Electronic Arts and Mondelez – or at least their products – are likely to be well known around the world.
Andrew Holliman, lead manager of the Polar Capital North American Fund said: “[These] either become large caps or carry on compounding away for a long time without becoming particularly large.
“Over the long term, small and mid-caps have outperformed broader indices in the US and the outperformance of large caps versus small and mid-caps over the past decade is more a case of the exception than the norm.”
sally.hickey@ft.com
