Interactive Investor

Fund spotlight: Brown Advisory US Sustainable Growth

6th September 2021 10:02

Liberty Godfrey from interactive investor

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An interactive investor analyst offers a view on one of our ACE 40 fund choices.

The ACE 40 fund: listen to the Fund Spotlight extract from our more recent Funds Fan podcast

The Brown Advisory US Sustainable Growth fund invests in a concentrated portfolio of companies. It seeks out firms that have durable fundamental strengths, sustainable competitive advantages, and compelling valuations.

The fund is managed by highly experienced managers Karina Funk, head of sustainable investing at Brown Advisory, and David Powell. The duo have managed the fund since inception. They are also supported by the well-resourced wider team at Brown Advisory.

Since the fund launched in April 2017, it has grown to a size of around £3 billion. It is benchmarked against the Russell 1000 Growth Index and sits within the Investment Association’s (IA) North America Sector. Although this fund is relatively new, the management group has followed this fund’s strategy since December 2009.

How it invests ethically

The fund excludes companies that defy the United Nations Global Compact Principles, which are a set of values that businesses should adopt in terms of human rights, labour, the environment and anti-corruption.  

Also excluded are companies that derive their revenues from controversial weapons, conduct non-medical animal testing or generate power from fossil fuels.

The fund also imposes limits on companies that derive more than 5% of revenues from tobacco, alcohol, gambling and military equipment.

Managers seek to identify US companies that have prospects for above average earnings growth in the future, and have effectively implemented sustainable business strategies.

What does it invest in?

The fund is made up primarily of larger companies. It invests in companies with a market capitalisation of over $2 billion at the time of purchase. The fund typically has 30 to 40 holdings (currently 34).

The largest sector exposures include information technology (43.7%), healthcare (23.3%) and consumer discretionary (15.1%), with the fund overweight (holds more than the index) in healthcare, real estate and financials. It is underweight communication services, consumer staples and industrials.

The funds top three holdings are US giants Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL). Other top holdings include multinational financial services corporation Visa (NYSE:V), UnitedHealth Group (NYSE:UNH), a multinational managed healthcare and insurance company, and American Tower Corp (NYSE:AMT), a global provider of wireless communications infrastructure and next-generation wireless technologies.

How has it performed?

The fund has delivered strong performance since launch in 2017. Over three years, it has outperformed its benchmark the Russell 1000 Growth Index. The fund has returned 100.6% versus 83.68% for the benchmark. It has also outperformed the IA North America sector average, which has returned 49.5%.  

Over a shorter time frame of one year, the fund has also outperformed, returning 35.7% compared to 25.7% for the benchmark and 27.1% for the sector average.

 

31/08/2020 - 30/08/2021

31/08/2019 - 30/08/2020

31/08/2018 - 30/08/2019

31/08/2017 - 30/08/2018

31/08/2016 - 30/08/2017

Brown Advisory US Sust Gr GBP B Inc

35.73

24.00

19.19

30.51

Russell 1000 Growth TR GBP

25.66

31.07

11.53

27.18

21.26

IA North America

27.13

9.47

7.41

19.50

15.17

Source: Morningstar Total Return GBP. Past performance is not a guide to future performance.

Why do we recommend it?

Brown Advisory US Sustainable Growth features on the ACE 40 as a US equity core recommendation. It also sits within the ACE ‘Considers’ category, meaning that it carefully considers a wide range of ESG issues or themes when balancing positive and negative factors.

We like the investment philosophy and that the fund has highly experienced fund managers.

The fund has shown itself to be resilient over the recent difficult period, and in addition the fund's process allows investors to be mindful of ethical issues while gaining exposure to US companies.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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