Investors Pull £800 Million From Silver Rated Fund

The JPM US Equity Income fund saw net outflows of £817 million, leading the IA North America sector to its first monthly net outflows for five months

David Brenchley 22 February, 2018 | 10:15AM
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Funds invested in US stocks have seen saw the first month of net outflows since August 2017, and the most net outflows for 15 months, according to Morningstar Direct data.

Investors withdrew £433 million from the IA North America sector in January 2018, but most of that was attributed to outflows from the Morningstar Silver Rated JPM US Equity Income Fund, which lost £817 million. The fund with the next most outflows was the Threadneedle American Select Fund, with £30 million.

Flows of £292 million into the passive Royal London US Tracker Fund offset the figures slightly. Unsurprisingly, with the US a notably difficult market for active managers to outperform, the five funds with the most net inflows were index trackers.

With US stock markets continuing to fly, the JPM fund has lagged for a while. The S&P 500 has returned almost a quarter since the start of 2017. The JPM fund is up just 3.5%, behind the IA North America sector average at 9%.

It’s done better over long periods, though. It has seen gains of 41.5% since the start of 2016 versus the S&P 500’s 37%; since inception, it’s almost quadrupled.

The value tilt of the fund has contributed to recent underperformance. The only big technology holdings its has are Microsoft (MSFT) and Apple (AAPL), meaning it’s missed out on plenty of gains.

Some market makers believe the value style of investing will come back into favour and momentum stocks will run out of steam at some point – though timing is less of a surety. And the fund seems poised to benefit from that, as well as the projected improvement in interest rates across the pond.

It has a third of the portfolio in financials services companies, with banking giants Bank of America (BAC) and Wells Fargo (WFC) and asset managers PNC (PNC) and BlackRock (BLK) making up the top four holdings.

Morningstar analyst Fatima Khizou likes the fund’s “thoughtful investment approach, long tenured manager and established team”. In a market not known for high dividend yields, manager Clare Hart looks for companies yielding at least 2% at purchase with low payout ratios.

While the fund is likely to lag in sharp rallies, Khizou says its Morningstar Risk score is low, indicating it has less downside volatility than peers. “Investors here have been well served and we see good reasons for this to continue,” she adds.

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David Brenchley

David Brenchley  is a Reporter for