An allocation to global equity funds usually offers a good way for investors to diversify their portfolio because the manager has a different, larger pool of companies to choose from.
It also means your capital isn’t just locked up in the concentrated UK market.
However, investors often want to use managers that have a proven strategy and a long track record of outperformance, while many IFAs will only look at funds with at least a three-year history.
With this in mind, FE Trustnet highlights three global equity funds that are run by managers that have a successful career running funds in the UK equity space.
All three of these portfolios are top-quartile performers since their launch, though as they don’t yet have a three-year record, they don’t currently have an FE Crown rating.
Standard Life Global Smaller Companies
Standard Life Global Smaller Companies is co-managed by Alan Rowsell and FE Alpha Manager Harry Nimmo – who is commonly regarded as one of the best UK small cap managers in the business.
The £230m fund is managed in the same way as Nimmo’s closed- and open-ended UK Smaller Companies funds: the manager looks for businesses that have the ability to grow to a much larger size in the long-run.
They both sit at the top of their respective sectors over the last 10 years.
However, given the fact that Nimmo’s open-ended fund is soft-closed and his trust has often traded on a premium to NAV in the past, using the global fund may be an investor's best bet of accessing the manager’s strategy.
While Nimmo helps with the running of the portfolio, Rowsell takes care of the day-to-day management.
He described his approach in a recent interview with FE Trustnet.
The fund is the seventh-best performing portfolio in the IMA Global sector since its launch in January 2012, with returns of 46.98 per cent.
Performance of fund vs sector since January 2012
Source: FE Analytics
Small caps have, however, had a very good run over this time so it isn’t too surprising to see that it has beaten the average fund in the sector during the rally.
Nevertheless, it has beaten other funds like it – such as Invesco Perpetual Global Smaller Companies and McInroy & Wood Global Smaller Companies – over that time.
UK equities only make up 15 per cent of Rowsell and Nimmo’s portfolio, though they do count Ted Baker and Blinkx as top-10 holdings.
Close to half of the portfolio is listed in North America, with another 15 per cent in European stocks.
The managers also have a 5 per cent cash weighting.
Standard Life Global Smaller Companies has an ongoing charges figure (OCF) of 1.83 per cent.
Lindsell Train Global Equity
The Irish-domiciled Lindsell Train Global Equity fund is managed by Michael Lindsell, who launched his investment group with FE Alpha Manager Nick Train in 2000.
The two managers work closely when it comes to portfolio construction.
The global fund is run in a similar way to Train’s top performing CF Lindsell Train UK Equity fund and Finsbury Growth & Income investment trust, as Lindsell maintains a very concentrated portfolio of market-leading businesses.
Like Train’s portfolios, it has also performed well.
FE Analytics data shows Lindsell Train Global Equity is the ninth-best performing portfolio in the IMA Global sector since its launch in March 2011, with returns of 45.4 per cent, beating its benchmark – the MSCI World index – by more than 20 percentage points.
Performance of fund vs sector and index since Mar 2011
Source: FE Analytics
The £350m fund also boasts top-quartile returns over 12 months.
There are a number of stock-overlaps between Lindsell’s and Train’s funds.
For example, Lindsell has a high weighting to Unilever, Pearson and Diageo – all of which are firm favourites with Train.
However, UK equities only make up 30 per cent of this portfolio. Lindsell is willing to take large bets on companies listed in the US, Europe and Japan, demonstrated by the fact he holds Walt Disney, Japan Exchange Group, eBay and Nintendo in his top-10.
Lindsell Train Global Equity has a total expense ratio (TER) of 1.45 per cent and requires a minimum investment of £1,500.
R&M World Recovery
Hugh Sergeant’s R&M World Recovery fund was launched in March last year on the back of his success running UK-focused portfolios.
For example, both of Sergeant's R&M UK High Alpha and R&M UK Equity Long Term Recovery funds have been top-quartile performers in the IMA UK All Companies sector over one, three and five years, with the former being the sector’s best performing portfolio over 12 months.
His £113m R&M World Recovery fund is run in a similar way to the manager’s UK funds, as he has an unconstrained approach whereby he invests in stocks that will benefit from a recovery in company profitability over the medium- and longer-term.
Our data shows that the fund is the best-performing portfolio in the IMA Global sector since its launch 11 months ago, having returned 47.91 per cent.
As a point of comparison, its FTSE All World benchmark has returned just 5.81 per cent over that time.
Performance of fund vs sector and index since Mar 2013
Source: FE Analytics
One issue that is worth highlighting is that while both of Sergeant’s UK funds have performed well over the longer term, their performance can mainly be attributed to very high returns when markets have risen.
FE data shows, for example, that both his UK High Alpha and UK Equity Long Term Recovery funds were bottom quartile performers in the falling market of 2011, losing in excess of 15 per cent.
Nevertheless, the manager currently favours the financial, consumer services and industrial sectors while North America is his largest regional weighting.
It is also a firm favourite with the wealth managers at Brewin Dolphin, as FE Trustnet highlighted today.
The fund has a yield of 2.5 per cent and it pays its dividend twice a year.
Although we only have the fund’s institutional share class data, it is available to retail investors on a number of fund platforms.
