Five US funds achieving stellar returns without riding the coat tails of the S&P 500 index

Using FE data, Portfolio Adviser shines a spotlight on the actively-managed US funds beating the S&P 500

United States Flag on a Subway Train


Using data from FE Fundinfo, Portfolio Adviser picked out the five actively-managed funds in the IA North America sector – a market area where the index is notoriously hard to beat – with the highest alpha generation relative to their average peer over three years.

All funds also had to have achieved a top-quartile Sortino ratio – which measures risk-adjusted returns without penalising the managers for capturing excess volatility – and a bottom-quartile tracking error. Of course, they all also had to comfortably outperform the S&P 500’s three-year total return of 35.3%. Here is what we found.

VT De Lisle America – 74.1% total return

First up for its alpha generation of 12.5% in addition to its average peer is the £256.7m VT De Lisle America fund. Managed by Richard De Lisle since its launch in July 2010, the manager has been investing in stocks since the age of 13, and in the US market since 1980.

The fund has a diversified portfolio of 179 holdings and is benchmarked against the S&P 500 index. However, it has a notable bias towards smaller companies at 54%, followed by mid caps at just shy of 30% and large caps at 27%.

The manager includes the likes of Canada-based Cameco Corp –  the world’s largest publicly traded uranium company – as its largest holding at 4.1%, followed by Build-A-Bear Workshop at 2.9% and bank holding company FS Bancorp at 2.8%. Its 10 largest holding account for 25.4% of the portfolio overall.

BNY Mellon US Equity Income Fund– 69.4% total return

This $335.6m (£263.7m) fund Ireland-domiciled ICVC has been headed up by John Bailier since January 2017. Bailier, who is lead portfolio manager of Newton Investment Management’s dividend-focused large-cap value strategy, pits his fund against the S&P 500 index as its benchmark.

The fund’s largest holdings include the likes of JPMorgan Chase & 5.3%, Cisco Systems at 4.5% and healthcare firm Becton, Dickinson and Company at 4.1%. It is unafraid to stray from its benchmark with notable overweight to financials at 27.6% compared to its benchmark’s weighting of 12.6%, a 6.4 percentage point overweight to healthcare at 19.5%, and more than triple the weighting to the energy sector than the S&P 500 at 15.4%. It has an alpha generation of 12.3% above its average peer in the IA North America sector.

Quilter Investors US Equity Income – 65% total return

Launched in July 2019, the £235.5m Quilter Investors US Equity Income Fund is managed by the BNY Mellon Investment Management team. The fund aims to provide both capital growth over rolling five-year periods and also aims to provide some income, with a dividend yield of 2.4%.

Benchmarked against the MSCI North America Value Index, the fund will invest across the cap spectrum and can, at times, hold a meaningful allocation to smaller companies. It favours stocks which the team believes are undervalued, or have the potential to grow more than the broader market anticipates. It is also likely to favour value stocks that offer dividend payments. It has an alpha generation of 22.3% relative to the average fund in the sector.

Artisan US Value Equity – 68.7% total return

Also with a value tilt relative to its average peer is the minute $1m Artisan US Value Equity fund, co-managed by Daniel Kane since 2013, co-manager Tom Reynolds since 2017 and Craig Inman since 2019.

The fund, which has an alpha generation of 10.4% relative to the benchmark, looks to invest in companies which are in “solid financial condition” and which have “attractive business economics” but which are undervalued relative to the broader market. However, the managers try to avoid value traps wherever possible.

With a relatively concentrated portfolio of no more than 50 stocks at any one time, the fund’s largest sector overweights include communication services at more than four times the index at 24.4%, financials at 30.9% compared to the index weighting of 20.7%, and a small overweight to consumer discretionary stocks at 7.7% compared to the benchmark’s 5.2%. Its biggest proportional underweight is to the IT sector at just 2%, compared to the index’s 9% weighting.

FTF ClearBridge US Value – 67%

The final of the top five alpha-generating funds in the list is the £36.7m FTF ClearBridge US  Value Fund, which has been managed by Samuel Peters and Jean Yu since 2013 and 2015 respectively. The £36.7m fund invests predominantly in large caps with 22% of the fund in companies that are more than $100bn in size. However, it also has a 21.3% weighting to stocks which are less than $10bn.

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