Favourite US Equity Funds by Category

The Sharing Alpha initiative gives us the opportunity to find out which fund managers and funds are preferred by European advisors and fund selectors.

Investor Relations Specialist

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Last week we published part of the report about Global Funds and Asian funds, and this week we want to analyse the US Equity Funds of each category, preferred by European advisors and fund selectors on the SharingAlpha platform.

The Sharing Alpha initiative gives us the opportunity to find out which fund managers and funds are preferred by European advisors and fund selectors. Fund selectors are asked to rate funds according to their expectations based on three parameters (3 P’s):

  • The experience and competitive advantage of the fund manager and his team (People)
  • The cost of the fund (Price)
  • The way the strategy is executed in terms of risk management (Portfolio)

On this occasion, we had the opportunity to understand which are the favourite US Equity Funds from Fund managers and Fund selectors by category.

CategoryInvestment FundAsset Manager
US Equity Large Cap BlendVanguard U.S. Opportunities FundVanguard
US Equity Large Cap GrowthBrown Advisory US Sust Gr FdBrown Advisory
US Equity Large Cap ValueRobeco BP US Premium EquitiesRobeco
US Equity Mid CapSchroder ISF US Small & Mid Cap EquitySchroders
US Equity Small CapFTF Royce US Smaller ComsFranklin Templeton – Legg Mason

Robeco BP US Premium Equities 

Duilio R. Ramallo, Fund Manager

Robeco BP US Premium Equities is an actively managed fund. Invest in US stocks. The selection is based on fundamental analysis. The goal is to outperform the index. The portfolio is systematically built from the bottom up, to exhibit attractive valuation, strong business fundamentals and improving trend. Companies can be large or small capitalization.

Investment Strategy:

Using data as of 28 February 2022, Robeco BP US Premium Equities outperformed the Russell 3000 Value Index. Especially positive were the healthcare and industrial sectors. In healthcare, it was a good month for a number of providers and service companies in the sector. In the industrials area, the aerospace and defense companies in the portfolio posted strong returns. Consulting and research firms also added to relative returns. Stock selection within the financials and information technology sectors was also positive. In terms of sector allocation, overweight exposure to information technology and consumer discretionary detracted from relative performance, while avoiding real estate helped performance.

Market vision

US equities, excluding small caps, continued to fall in the second month of the year, influenced by rate hikes, inflation and the war in Ukraine. Values ​​increased their lead over growth stocks, with small-caps gaining 1.66% in February, while large-cap and mid-cap value stocks far outperformed their low-end counterparts. growth, albeit in negative territory.

Fund Manager Expectations

We remain attentive to the reaction of the markets to the conflict in Eastern Europe. As we maintain portfolios with a consistent bottom-up stock selection strategy, we do not seek to position ourselves on geopolitical or macroeconomic events. The fund does not have direct exposure to companies based in Russia or Ukraine. The market has started to present attractive opportunities and we have taken advantage of some, but we are patient as the macroeconomic scenario is complex due to monetary policy tightening, inflation, supply chain disruptions and the situation in Ukraine. The fund remains well positioned, with holdings reflecting the characteristics of Robeco Boston Partners’ three circles: attractive valuations, strong business fundamentals and identifiable drivers.

FTF Royce US Smaller Companies

Lauren Romeo, Fund Manager

The investment objective of Royce US Smaller Companies Fund is long-term growth of capital. Royce Investment Partners serves as the Fund’s sub-adviser. Lauren Romeo, CFA, serves as the Fund’s Portfolio Manager. The Fund invests primarily in smaller companies, those with market caps up to $5 billion.

The portfolio manager seeks long-term ownership of leading companies with sustainable, moat-like franchises and focuses on leading quality companies—those with low debt, the ability to generate excess cash flow, and attractive prospects that are selling at prices Royce believes do not fully reflect these attributes. The manager looks for small-cap companies with high returns on invested capital that she believes can compound value by reinvesting current earnings back into the business at high rates of return for long periods of time. Her aim is to buy when the stock price is depressed due to cyclical or temporary company-specific issues in order to enhance long-term returns.

The Fund’s largest weightings remain in Industrials and Information Technology, and each is also typically overweighted versus the Fund’s small-cap benchmark index, Russell 2000 Index. The portfolio also maintains a sizable weight in Consumer Discretionary, though at a slightly lower weight vis-à-vis the benchmark. This positioning is consistent with the portfolio manager’s focus on high-quality small-cap companies.

The Fund continues to focus on identifying high-quality smaller cap companies that generate—and appear be able to sustain—both high returns on invested capital and solid free cash flow well into the future. The portfolio manager seeks to buy these companies at attractive valuations, such as during times of general stock market weakness or share price declines due to company-specific issues that she believes are temporary and fixable. Each of these situations has materialized during the first two-plus months of 2022. As such, she has added to existing holdings and initiated a few new positions, with a focus on the long-term earnings power and favorable risk/reward scenario each appears to offer.

Schroder ISF US Small & Mid Cap Equity

Robert Kaynor, Funds Manager

The Ukraine war has drastically affected the stability of financial markets. Despite the increased volatility, the strength of the US economy persists, and we believe domestically-focused companies are insulated from the tragic war in Ukraine.

In this respect, US small-cap companies present an attractive long-term return potential for a number of factors, which we describe below. 

First, the composition of the S&P 500 index has been accumulating a concentration of stocks and sectors with higher external risk. By contrast, the Russell 2000 index, which holds US small-cap stocks, remains well diversified, with a strong domestic bias. Second of all, these stocks are more hedged to what happens in other countries, as a large part of the earnings of small-cap companies are domestic. Third, they trade at much more attractive valuations than large companies. And last but not least, earnings per share are expected to grow more in the US small cap segment than among the larger companies in the coming year. All this suggests that US small and mid-cap companies will continue to offer attractive long-term investment opportunities.

In this respect, Schroder ISF US Small & Mid Cap Equity offers a gateway to this investment opportunity. It aims to provide capital growth in excess of the Russell 2500 Lagged index over a three to five-year period by investing in the equities of US small and mid-cap companies that benefit from strong US economic growth. In addition, these companies meet sustainability criteria. This fund is Article 8 under the SFDR.

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Favourite US Equity Funds by Category