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North America sector

North America sector

Funds which invest predominantly in the shares of North American companies. Most place an emphasis on capital growth, but some also aim to generate income.

Joseph Hill - Investment Analyst
28 July 2020

The US stock market is home to some of the world's most well-known companies. Many of these are found within the Tech sector and include household names such as Facebook, Amazon, Google parent company Alphabet and Apple.

But technology isn’t the only game in town. The US is home to world-leading companies in almost every industry there is, from media and film, through to manufacturing and transportation.

Because of this variety, investing in the US could be a good way to diversify an investment portfolio. Investors should be mindful that US funds can come in different guises. Many funds investing in the US prioritise growth, rather than income. Some focus on the largest companies in the market, usually those within the S&P 500 Index. Others look for opportunities amongst small and medium-sized companies, which may offer greater growth potential, but are higher risk.

Our View

The US is home to many large world-leading businesses that dominate their industries, and as a result it accounts for over half of the global stock market. It’s also home to some excellent smaller businesses, some of which are among the most innovative around and offer lots of growth potential, although they're higher risk than their larger counterparts.

We think most diversified portfolios should have some exposure to the US market. But it's one of the most heavily researched in the world so share prices are often quick to react to new information. We think this can make it more difficult for fund managers to find opportunities missed by others and to consistently perform better than the broader market over the long term.

However we think that there are some experienced managers that are well equipped to do so and we continue to look for other managers investing in the US that we think have the potential to perform well over the long term.

Investment notes

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Wealth Shortlist funds in this sector

Funds chosen by our analysts for their long-term performance potential

See the Wealth shortlist

It’s been a turbulent six months for the US market. The impact of the coronavirus meant that on 3 March we saw the first rate cut from the Federal Reserve (Fed) outside of a regularly scheduled policy meeting since the financial crisis. The Fed cut interest rates by 50 basis points to a target range of 1%-1.25%. And in response to the evolving risks to the economy posed by the coronavirus outbreak, we’ve since seen a further rate cut to a target range of 0%-0.25%, combined with significant quantitative easing (QE). The Fed expects to maintain this target range until it’s confident that the economy has weathered the economic impact of the coronavirus pandemic, and is on track to achieve its maximum employment and price stability goals. This could still be some time away meaning rates are likely to stay at rock bottom for a while yet.

Even taking into account the impact of the coronavirus on share prices, many sectors of the US market have still delivered positive returns to investors over a five year period, with oil and gas the exception. A key driver of returns over this period has been the Technology sector which has grown faster than any other, returning an exceptional 254.6%. Remember though that past performance is not a guide to the future.

5 year returns

Past performance isn’t a guide to the future. Source Lipper IM to 30/06/2020

We’ve seen a lot of discussion about what shaped economic recovery we might see, but for now this remains to be seen. The immediate priority for the US government will be reversing the worrying upward trend in coronavirus cases in the country, this will allow more sectors to operate closer to their normal state unlocking economic activity along the way.

With household consumption accounting for around 70% of the US economy, the US consumer will be key to any economic recovery. So the government and businesses alike will be keen to see any pent up consumer demand released back into the economy.

We could also see further market volatility through the second half of the year with the US election date set for 3 November. Americans going to the polls will be choosing to either re-elect current President Donald Trump for a second term in office or to replace him with Democrat candidate Joe Biden who served as Vice President under Barrack Obama.

There has always been and probably always will be short term issues that capture the attention of markets. But over the longer term the US market has delivered strong returns to patient investors and we’re excited about the long-term opportunities that lie ahead in the world’s largest stock market, although there’s likely to be volatility along the way.

Investment notes

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Five year performance

  • FTSE North America

    +112.34%

  • FTSE USA/Technology

    +254.62%

Data correct as at 30/06/20. Please remember past performance is not a guide to future returns.

Our Wealth Shortlist features a number of funds from this sector, selected by our analysts for their long-term performance potential. The Shortlist is designed to help investors build and maintain diversified portfolios. To use the Shortlist to build your portfolio, you should be comfortable deciding if a fund fits your investment goals and attitude to risk. For investors who don't feel comfortable building and maintaining their own portfolio we offer ready-made solutions, which are aligned to broad investment objectives. For those who want extra help, you can also ask us for financial advice.

The fund reviews below are provided for your interest but are not a guide to how you should invest. For more information, please refer to the Key Investor Information for the specific fund. Remember all investments can fall as well as rise in value so you could get back less than you invest. Past performance is not a guide to the future.

There is a tiered charge to hold funds on the HL platform. It is a maximum of 0.45% a year - view our charges. Comments are correct as at 30 June 2020.

Wealth Shortlist fund reviews

The team of four co-managers aim to grow an investment by investing in businesses with exceptional growth potential and holding them for long enough to reap the rewards. We like the managers long-term, disciplined investment process and think they are well equipped to succeed in navigating the world’s largest stock market. The managers believe few companies are capable of delivering exceptional returns over the long run, so they run a relatively concentrated fund of between 30 and 50 stocks, which can increase risk.

They believe that companies with resilient business models make for good long term investments and that corporate culture can be a key component of company performance and ultimately investor returns, although of course there are no guarantees. The managers have also identified a number of powerful trends they believe to be occurring across the economy. Many of the businesses driving these trends are highly innovative and disrupt old ways of doing things.

The fund has performed very strongly so far this year with its positioning towards technology and ‘the new economy’, and away from industrials which have tended to be more cyclical, having a positive impact. Over the period of the coronavirus lockdown we’ve seen demand for online services explode, benefitting some of the fund’s investments. Past performance isn’t a guide to the future however, and growth-style investments have now rallied for a considerable time.

The fund’s manager Lauren Romeo looks to deliver long term growth by investing in small and medium-sized businesses with growth potential that’s been overlooked by other investors. These can often be companies that don’t attract as much attention from analysts or investors; meaning there could be opportunity to uncover hidden gems, although investing in smaller companies is a higher risk approach.

We like the team’s disciplined investing approach and think Lauren Romeo is supported by a capable, experienced team, having managed the fund herself since 2011.

The fund’s delivered positive returns in recent years but hasn’t managed to keep pace with the broader market of small and medium–sized US companies. Romeo’s value investing style hasn’t been in favour with the market for much of this time. But we think it’s important to have a range of investment styles in an investment portfolio and the manager’s strategy and focus on valuation could add diversification. We continue to believe that the fund harnesses the skill of a talented team with a sensible investment approach. We still think the fund has the potential to perform well and provide good returns for investors over the long term, although there are no guarantees.

This fund aims to track the performance of the FTSE USA Index. It invests in more than 600 mostly large American companies.

This fund invests in most companies in the FTSE USA Index in proportion to each company’s size. The larger the company, the larger its impact on the index. Smaller businesses that make up a very small part of the index are sometimes not held in the fund as they can be more difficult or expensive to buy and sell. This helps to keep costs lower.

The fund’s tracked the index tightly and efficiently over both the short and longer term, losing little value to annual charges. We think it’s a great option for low-cost exposure to the US stock market.

The fund aims to deliver long-term growth by investing in smaller companies based in the US. We think this is a great way to invest in smaller companies with high growth potential in one of the world’s most innovative markets, although investing in smaller companies is a higher risk approach.

We like Cormac Weldon’s clear, disciplined investment approach, which has served the fund well since its launch. He has almost 20 years’ experience of investing in the US and is supported by a strong team of analysts. Weldon runs a relatively concentrated fund investing in 40-60 companies out of the thousands that make up the benchmark, which can increase risk.

Since joining Artemis to launch the fund in October 2014, Weldon has delivered attractive returns for investors. Our analysis suggests Weldon's stock picking has added value for the fund, particularly in the consumer discretionary sector. The fund has also held up relatively well during the coronavirus related market volatility, with a number of companies held in the fund benefitting from trends that have been accelerated over this period. Please remember past performance isn't a guide to the future.

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Investment notes

Please note the research updates are not personal recommendations to trade. If you are unsure of the suitability of an investment for your circumstances please seek advice. Remember all investments can fall as well as rise in value so investors could get back less than they invest.

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