US stocks have had a wild ride so far this year, with the emergence of tariffs prompting volatility.
Broader questions about the endurance of the ‘US exceptionalism’ theme have meanwhile provoked a flight from US assets more generally, and a weakening of the dollar.
This has been somewhat painful for returns. Yet having experienced some big downward lurches followed by powerful rallies, the S&P 500 is actually up by 1.7 per cent for 2025 to date as of 17 June, in dollar terms at least. In sterling terms, however, the index is down by 5.7 per cent.
US equity funds, which have long had to contend with the issue of underperforming a runaway index, are generally suffering in these tougher times, too.
Funds focused further down the market cap spectrum are in an especially tough spot, with Schroder US Mid Cap (GB00B7LDLV43) off by around 15 per cent and Premier Miton US Opportunities (GB00B8278F56) down by 11.3 per cent.
Well-known trusts such as Baillie Gifford US Growth (USA) and JPMorgan American (JAM) are sitting on double-digit losses, and generally speaking very few names are in the black.
But what of those that are doing well? A broad sell-off can often tell us which funds are taking a more differentiated approach, and that seems to be the case here.
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Morgan Stanley US Advantage (GB00BZ4CG750), which has returned around 6 per cent this year in sterling terms, has more in common with future trends fund Scottish Mortgage (SMT) than a US equity tracker.
Its top 10 holdings include Cloudflare (US:NET), DoorDash (US:DASH), Tesla (US:TSLA), CrowdStrike (US:CRWD), Roblox (US:RBLX), Shopify (US:SHOP) and even Mercado Libre (US:MELI), the South American ecommerce play.
The Morgan Stanley fund also focuses much more heavily on consumer discretionary shares than the underlying market.
Elsewhere, North American Income trust’s (NAIT) shares are sitting on some small gains for the year.
This is an interesting strategy, given it focuses on dividend investing in what is seen as a growth market, and given it has something of a value bias.
The fund, whose shares trade on a 3.6 per cent dividend yield, has decent allocations to the healthcare and financials sectors and top holdings include the likes of Philip Morris (US:PM) and Chevron (US:CVX). Not a single member of the Magnificent Seven sits in its top 10 holdings list.
Meanwhile, a portfolio that I would not have expected to hold steady appears to be doing so. Pershing Square (PSH), the Bill Ackman vehicle heavily exposed to the US consumer, has made positive net asset value (NAV) returns in the past six months, with its shares pretty much flat for the year.
As usual, there’s plenty going on within the fund, with Ackman recently upping his stake in real estate company Howard Hughes (US:HHH) in what has been seen as a bid to create a holding company in the style of Berkshire Hathaway (US:BRK.B).
The trust has also initiated a position in Amazon (US:AMZN) in recent months. It does still have plenty of positions in consumer-facing companies such as restaurants and hotel brands, however, leaving it exposed to a potential economic downturn.
Differentiated funds are at least having their moment in the sun. The question, as ever, is whether they can hold their own against the S&P in the longer run.
