Asset management firm BNY Mellon Investment Management (IM) has launched a US equity strategy that it claims should outperform the US large cap index by 2-4 percentage points each year, in the notoriously difficult US market.
The BNY Mellon Dynamic US Equity fund will be managed by the firm's boutique, Mellon Capital Management. The firm said the strategy will use "a non-traditional, relative value approach" aiming outperform the S&P 500 by 2 to 4 per cent a year, but gross of its 0.5 per cent annual management charge.
Over time, investors have become disappointed with active US large cap managers and have often opted for passive exposure. In the IA North America sector, only 36 funds from 116 products have outperformed the S&P 500 over three years. The index has risen 58 per cent, but the average fund only returned 51 per cent. On a five-year basis, fewer than a quarter of the 98 funds have beaten the index.
However, BNY Mellon if facing the claim that funds struggle to beat passive rivals head on, suggesting the strategy can give investors exposure to US large cap and has the potential to generate excess returns.
This new fund aims to give investors the returns they need without the high fees, the company said.
The BNY Mellon Dynamic US Equity Fund is registered for distribution in the UK and is the mulit-boutique fund firm's second fund launch in recent months. Back in September, BNY Mellon IM launched a US high-yield beta fund, for UK intermediary clients.
The aim of this fund was more akin to following a benchmark-aware investment strategy. The firm said it aimed to "overcome the difficulties that high-yield bond funds have experienced" by having similar approach and return profile to the Bloomberg Barclays US Corporate high-yield index over a full market cycle.
Provider view
James Stavena, fund manager of the BNY Mellon Dynamic US Equity fund, said: “There is nothing like it in the marketplace today, the 28-year track record strategy speaks for itself. Per the eVestment US large cap universe, which includes well over 200 strategies, the Dynamic US equity is the number one strategy over three, five, seven and 10 years. Only 21 strategies have a 28-year track record and the Dynamic US equity beats them all."
Adviser view
Neil Liversidge, managing director at West Riding Personal Financial Solutions, said: “There’s no shortage of US equity funds; what there is a shortage of in that sector is consistency of performance, which is one of the key factors we look for when we look to panel funds.
“I would hope there’d be a hedged share class given the current weakness of Sterling.”
Charges
0.5 per cent annual management charge.
Verdict
At 0.5 per cent, the fund is relatively well priced for an active strategy, and could work as a core offering. But this only if it offers closer to the 4 percentage point outperformance. If lower, then a single-digit basis point tracker might be more beneficial. The firm does have a record to match, but the US market has changed considerably over the past 10 years.
