19 Sep Going Global…
As part of our ongoing Gatekeepers research, we’re focusing on a different sector each week. This week it’s the global sector, the bestselling sector of the past year.
Adviser portfolios tend to follow asset allocation templates that disaggregate global equities into regional, single-strategy funds, so you would expect the one-stop-shop global equity fund to be a less popular alternative. It’s a surprise, therefore, to see the Global Equity sector consistently topping the sales charts.
In the second quarter of 2017, the Global sector was the second most popular sector with 334 picks across our 48 fund selector lists. Overall 111 funds were selected, but while the average number of selections was three, the top ten funds attracted 119 picks between them. Fundsmith Equity was the most popular with 23 picks.
Top Global performers
With equity markets, particularly in the US, maintaining their eight-year bull run and reaching new highs almost daily, it’s clear many portfolio managers are letting active managers do the heavy lifting, with a single global equity fund being viewed as the core of the portfolio’s overseas equity exposure. So who’s getting all the action?
If you were big on Small cap, Technology and Asia exposure (ie not tracking the index) so far in 2017 you would be head, shoulders and waist above passive global equity funds, who have returned less than 9%. Some less well-known funds did remarkably well, with Aubrey Capital Management’s small but aggressive £36m Global Conviction fund returning over 35%, followed by Morgan Stanley’s US$2.5bn Global Opportunities Sicav with 29%.
The Morgan Stanley fund warrants a closer look. The fund has been 1st quartile every year since its GBP launch five years ago, and Kristian Heugh has run it since its initial launch in 2010 – indeed it has all the Fundscape factors (find out more here. Assets have increased tenfold in only two years, but the ‘curse of the sicav’ seems to apply since the fund does not appear on any Gatekeeper lists in our survey.
The distributors’ darling, the now £12bn Fundsmith Equity, appears on 23 lists. It holds a more diverse portfolio focused on consumer products and healthcare so has gained a rather more sedate 15% in 2017. We first came across Terry Smith in the early 1990s thanks to his book Accounting for Growth, a remarkable and necessary exposé of sharp City accountancy practice and for which he was duly fired. That certainly encouraged our respect and as a latter-day fund manager he continues to make saying no a virtue, for example, no market timing, no shorting, no hedging, no index-hugging (active share 93%) etc. Together with a very disciplined stock-selection process, this makes the fund a virtual stand-alone brand for the global equity sector and it is no surprise that this fund is responsible for a third of the Global sector’s net sales via platforms for the year to date (Source: Fundscape Platform data).
Baillie Gifford Global Discovery is definitely worth a mention as a hidden gem. Appearing on only four lists, Doug Brodie’s essentially smaller companies fund holds less than £300m assets but has been a consistent outperformer relative to the S&P Global Small Cap Index, and sports an active share relative to its index of a whopping 99%. The argument for longer-term exposure to smaller companies is well understood, and this fund could be a valuable enhancement of the global equity portion of investors’ portfolios.
Find out which global funds have the most picks verse which funds have the most performance here.
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