Skip to the content

Alternatives to the M&G Global Basics fund

14 October 2013

FE Trustnet looks at some of the options available to investors who are worried about Graham French’s flagship fund, which has had a dreadful run of late.

By Alex Paget,

Reporter, FE Trustnet

The recent poor performance of FE Alpha Manager Graham French’s M&G Global Basics fund caused the manager to publically apologise to his investors last week.

French has registered bottom-quartile returns over one, three and five years. This, combined with the general negative sentiment surrounding the basic materials industry, has led to big net redemptions. Falling asset prices and outflows have seen the fund’s total assets shrink from £6bn to £4.5bn over the last 24 months.

The manager attributed the lacklustre returns to his exposure to emerging markets and the mining sector. Although he has chopped down his holdings in commodities, French is keeping his weighting to companies that offer him a chance to play developing market growth stories.

Nevertheless, he is confident he can turn around M&G Global Basics’ recent performance and return it to the top of the IMA Global sector.

For anyone left unsatisfied by his comments last week, however, here are three possible alternatives to the fund.


JM Finn Global Opportunities

Rob Morgan, pensions and investment analyst at Charles Stanley Direct, says that FE Alpha Manager Anthony Eaton’s JM Finn Global Opportunities fund is the most clear-cut alternative available.

"The one that springs to mind is the JM Finn Global Opportunities fund, which is managed by Anthony Eaton," he said.

"The fund is very much focused on tapping into increased wealth globally, and especially in the emerging markets. Because of that, it holds major ports and logistic-type stocks, and big consumer brands, so it follows a similar theme to the M&G fund."

"Similar to French, Eaton has also moved out of commodities," he added.

Eaton has managed the JM Finn Global Opportunities fund since October 2005.

According to FE Analytics, it is a top-quartile performer in the IMA Global Growth sector over that time with returns of 133.38 per cent – 50 percentage points more than the returns of the sector average.

Performance of fund vs sector since Oct 2005

ALT_TAG

Source: FE Analytics


The fund is a second-quartile performer over five years and although it has fared better than M&G Global Basics over one and three years, it hasn’t exactly shot the lights out, and is also a bottom-quartile performer over those time frames.

As a point of interest, JM Finn Global Opportunities is more nimble than French’s portfolio, with less than £90m worth of assets under management, meaning that it can delve lower in the market cap spectrum. That said, it is predominantly a large cap fund at the moment.

With a yield of 2 per cent, JM Finn Global Opportunities may be of particular interest to investors who prioritise dividend-paying vehicles. It has an ongoing charges figure (OCF) of 1.83 per cent and requires a minimum investment of £1,000.


Investment trusts

For the bargain hunters among you, an investment trust on a wide discount could be a good option.

Charles Stanley’s Stephen Peters highlights the Manchester & London IT as a good option in this regard. Although it sits in the UK sector, the trust has a global focus, trying to access similar themes to those explored in M&G Global Basics.

"It has a large chunk of its assets in commodities and has a very large holding – 14.5 per cent – in a company called PZ Cussons. It may not sound very exciting, but it has a big part of its business in Nigeria," he said.

"It also has Glencore, Diageo and Standard Chartered, for instance."

The trust targets UK companies with a large international focus. Management reports that around 30 per cent of the portfolio is exposed to Asian economies, for example.

Although Peters says Manchester & London IT is a good alternative to French’s fund, he says it is not for the faint hearted.

"It is on a 10 per cent discount and is quite small at £70m. It is a family company as the manager Mark Sheppard is the son of the father who founded it," he explained.

"Investors who buy it need to be aware that the family owns around 50 per cent and it doesn’t trade much. However, it has good dividend growth and currently yields 4 per cent. It has had a disappointing few years as the manager has been very negative on the world."

As Peters mentions, the trust has struggled of late and its numbers do not make for good reading. It has underperformed against its benchmark – the FTSE All Share – over one, three, five and 10 years.

Performance of trust vs index over 10yrs

ALT_TAG

Source: FE Analytics


The trust had a very good run in the early and mid-2000s, when emerging markets were in favour. However, the recent underperformance has hampered long-term returns.

"You can make the most money buying when others are wary, so maybe now is a good time to look at it. The trust can’t do share buy-backs [to control the discount], but the manager is a very, very clever guy," he added.

The trust has a base fee of 2 per cent and is 1 per cent geared.


For a trust that invests in companies domiciled around the globe, investors could look at the Scottish Mortgage Investment Trust, which is headed up by star manager James Anderson.

Like French, Anderson believes emerging markets will be the driver of investment themes over the long term. He told FE Trustnet last year that the long-term growth potential of China will unearth the majority of opportunities in the coming years.

Among his largest holdings are Chinese search engine provider Baidu and Swedish industrial company Atlas Copco.

ALT_TAG Anderson (pictured) is one of the most respected investment trust managers in the business, leading Scottish Mortgage to above-benchmark returns over one, three, five and 10 years. The manager has a very low turnover and invests purely for the long-term, once telling FE Trustnet "if you don’t have a five-year time horizon, don’t invest in my fund."

The trust is still trading on a slight discount and has ongoing charges of 0.51 per cent, making it one of the cheapest closed-ended options around.


Aberdeen World Growth & Income

Although some investors may be looking for a direct alternative to M&G Global Basics, others may just want to have a globally focused fund that gives them exposure to all aspects of the global market. Indeed, this is very likely if you are worried about the slowdown in China and the apparent end of the commodities super-cycle.

Morgan says he would usually suggest a closed-ended fund for that type of investor as he prefers the likes of Murray International. However, as many of those trusts are now trading on much tighter discounts than they have been in the past, he says now probably isn’t the best time to buy.

"That’s the problem at the moment as most of those global investment trusts are looking expensive," he explained.

As an alternative, he likes the open-ended Aberdeen World Growth & Income fund as it has a very similar style to the group’s Murray International trust.

"Instead, I would go for the Aberdeen World Growth & Income fund. Aberdeen’s Murray International is trading on a wide premium but this open-ended version is very similar and you are just buying at NAV."

"It has had a tough time recently but I like it as a long-term, international holding. It is a good 'buy, hold and forget about' type of fund," he added.

The fund is run by the Aberdeen’s global equities team, which means it is heavily influenced by industry stalwart Bruce Stout.

As Morgan points out, the fund has had a tough time recently. It has returned 35.55 per cent since its launch in October 2009, while the MSCI World index and the IMA Global Equity Income sector have returned 47.61 per cent and 47.12 per cent, respectively.


Performance of fund vs sector and index since Oct 2009

ALT_TAG

Source: FE Analytics

The fund has a very similar makeup to Stout’s Murray International, with Roche, Nordea Bank, British American Tobacco and Philip Morris International featuring in both portfolios’ top-10 holdings.

Aberdeen World Growth & Income yields 4 per cent, has an OCF of 1.65 per cent and requires a minimum investment of £500.
ALT_TAG

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.