And the winner of the North America award is...
1-year return: 19.2%
3-year return: 110.9%
JPM US Small Cap Growth has knocked last year’s winner off the top spot in the Best North America fund category, having produced the highest returns in the sector over the past three years and achieved one of the most consistent performance profiles. It has beaten its sector average and its benchmark, the Russell 2000 Growth index, over all notable time periods.
Historically, investing in smaller companies has produced greater returns than larger-company investing. Although smaller companies can be more vulnerable to an economic downturn, they provide greater sector diversification than the large-cap S&P 500 index; this fund is well diversified with around 120 holdings, helping to reduce volatility.
It uses a bottom-up stock selection process to target companies with strong fundamentals that have the ability to deliver higher earnings growth than market expectations. It was renamed from JPM US Smaller Companies in December 2018 with the word ‘growth’ being inserted to better reflect its growth-focused investment style.
It benefits from an experienced and long-standing management team in the form of New York-based portfolio managers Eytan Shapiro and Timothy Parton. Shapiro is chief investment officer of the JPMorgan growth and small company US equity team and has 36 years’ investment experience, most of them with JPMorgan.
The US boasts a wealth of technology companies and this is where 26% of the fund’s £221 million of assets is invested – 9% more than the benchmark. Top 10 tech holdings include Envestnet, a provider of wealth management technology to financial advisers, and Entegris, which is involved in the manufacture of semiconductors.
HIGHLY COMMENDED FUND
Baillie Gifford American slips from winner last year to runner-up in 2019 in this sector, with an almost equally impressive showing. A newcomer to our Rated Funds for 2019, it backs exceptional growth companies.
Four managers from Baillie Gifford’s North American equities team are named on the £2.14 billion fund – Tom Slater, Gary Robinson, Helen Xiong and Kirsty Gibson. They back their judgement, running a concentrated portfolio of 30 to 50 stocks, making the portfolio looks very different to the wider US stock market.
The fund’s outperformance has been remarkably consistent over the medium to long term, but because it is hugely growth oriented it can suffer setbacks in periods of market stress. It was among the weakest of its peer group in the latter part of 2018 when the US market had a rocky ride, for example.
Fundamental analysis behind this stockpicking success