As part of its fund selector analysis on US equities, Morningstar has identified which of the newer funds to watch.
Competitive advantage
The Arrowpoint Small Cap Growth Ucits Fund is run by Brian Schaub and Chad Meade, who have worked together for more than 10 years.
They bring with them a strong track record from their previous assignment at Janus, and are using the same investment approach at Arrowpoint. They invest for the long term and search for companies with substantial competitive advantages, relatively stable revenue streams and solid balance sheets. Sector weightings will diverge substantially from those of the Russell 2,000 Growth index benchmark at times.
The portfolio tends to exhibit a hefty stake in industrials, particularly business services firms, and often holds a smaller-than-average weighting in healthcare stocks. It also features a sizable stake in micro-cap names. The duo have thus far delivered solid returns, ahead of the index and category peers.
Quality and sustainability
The Virtus GF US Small Cap Focus Fund was launched in March 2014 and is managed by an experienced team. They employ a bottom-up approach that seeks to identify high-quality companies at attractive valuations.
They prefer companies with high barriers, quality management, sustainable high returns and low debt. Since its inception to the end of January 2017, the strategy has delivered positive returns that are well ahead of its category peers and the Russell 2,000 index.
