PA ANALYSIS: Is now the time to invest in active US equity funds?

After a wide swathe of active US equity funds outperformed the S&P 500 during Donald Trump’s first 100 days in office, is now the time for investors to re-think their assumptions on the active approach?

PA ANALYSIS: Is now the time to invest in active US equity funds?


Trump has been moving markets since first being named as the next president of the US, but data suggests his appointment has failed to ignite any surge in interest in taking an active approach toward the nation’s stockmarket. 

Recent Morningstar data on European-domiciled funds shows US equities outsold all other sectors for passive fund flows in 2016, gaining positive net flows of €12.4bn (£10.45bn).

By contrast, US equity active funds saw net outflows of -€13.7bn over the same period, though active UK equity and European equity funds saw greater losses of -€15.7bn and -€47.8bn, respectively.

Speaking to fund selectors, post-Trump, the old narrative on the world’s largest stockmarket – US passive funds good, US active funds bad – remains very much intact.

Seven Investment Management’s fund selector team, for instance, steers well clear of picking active funds in the US, one of the firm’s investment managers Ben Kumar confirmed.  

“They just don’t do it,” he said.

“We have a couple of investments in the micro-cap space but that’s not really so much a US market play as it is the fact that micro-cap is good for active managers wherever you are in the world.

“Our headline view is we don’t think you can find good active managers in the US large cap space. It is really difficult to outperform unless you do the Warren Buffet activist approach of owning companies.”

“A very policy-driven environment doesn’t help active management,” said Brewin Dolphin head of research Guy Foster, reflecting on the prospects of active funds in the Trump era.