Just six funds from the IA Global sector, including Robin Geffen’s Neptune Global Equity and James Thomson’s Rathbone Global Opportunities portfolios, have managed to turn some of the peer group’s largest falls into first-quartile performance over the past decade, FE Trustnet data shows.
We recently looked at the funds staging the biggest bounce backs in the IA UK All Companies sector, highlighting managers that have suffered bottom-quartile maximum losses in the last 10 years but then went on to make some of its best returns.
In that article, we looked at the performance of funds such as SVM UK Opportunities, Standard Life Investments UK Equity High Alpha and Schroder UK Mid 250, which are currently in the first quartile over 10 years but suffered much larger falls than their peers in the financial crisis.
As the below graph shows, the average fund in the IA Global sector has significantly underperformed the MSCI AC World index over the past 10 years with a gain of 105.35 per cent against the market’s 129.65 per cent rise. The average global fund also has a maximum drawdown of 34.10 per cent and annualised volatility of 14.13 per cent, which is broadly in line with those of the index.
Performance of sector vs index over 10yrs
Source: FE Analytics
FE Analytics shows the three funds with the largest maximum loss over 10 years are First State Global Resources, Schroder ISF Global Energy and Smith & Williamson MM Global Investment and all of these portfolios have posted fourth quartile returns over the same period.
However, the fund with the fourth highest maximum loss went on to turn out some of the sector’s highest returns over the past decade. Anthony Eaton’s CF JM Finn Global Opportunities fund posted a maximum loss of 43.15 per cent during the 2008 crisis but has made still made its investors 149.32 per cent over 10 years.
The fund, which appears on the FE Research team’s Select 100, has a high weighting to emerging markets, which means it tends to be more volatile than its peers and experience higher losses. However, it also has the potential for strong upside.
The FE Research team said: “Although at a glance the fund’s strategy seems simple, Anthony Eaton offers an interesting and unique approach to global equities, with his focus on globalisation and its economic impact.”
“This underlines his capacity to pick the long term trends he believes are playing out. His unwavering conviction in his approach, even during lengthy periods of heavy losses, will prevent him from chasing the latest fashionable investment.”
Performance of fund vs sector over 10yrs
Source: FE Analytics
Neptune Global Equity, managed by Robin Geffen, is another fund that has achieved the feat. Its 10-year maximum loss of 42.95 per cent is the sector’s fifth highest but it went on to made 152.24 per cent over the same period.
The fund’s progress over three and five-year periods has been more challenged, with the portfolio residing in the fourth quartile over both. However, it has jumped back into the first quartile over one year after its high conviction bets, such as to Japanese equities and a stronger dollar, started to pay off.
Geffen recently told FE Trustnet: “We believe the Japanese equity market can make significant progress from here and the yen will continue to weaken. In our view the Bank of Japan will continue to loosen monetary policy to reach its inflation target, whilst the Japanese market is also set to benefit from the much anticipated move by Japan’s state pension fund to double its equity allocation to 25 per cent.”
FE Alpha Manager James Thomson was hit by a 42.93 per cent maximum loss in his Rathbone Global Opportunities fund during the financial crisis, according to FE Analytics, but boasts a 10-year return of 181.68 per cent. The portfolio’s steep losses in 2008 prompted the manager to rebuild his investment process, whereby he added a degree of “weather-proofing” to avoid similar situations in the future.
Thomson is a stock picker who runs a concentrated portfolio of companies that can grow their earnings faster than their rivals, often built around businesses that are more economically sensitive and from the mid-cap part of the market.
Rathbone Global Opportunities is another member of the Select 100 and the FE Research team said: “The manager has developed an approach which limits the damage to the fund when markets fall. Nonetheless, it is still very much a fund that is likely to do best when the economy is improving and stock-markets are rising.”
Performance of funds vs sector and index over 10yrs
Source: FE Analytics
Sanlam Global Financial, SKAGEN KonTiki and Artemis Global Growth are the only other IA Global members that are in the fourth quartile for 10-year maximum loss and first quartile for total returns.
Kokkie Kooyman is willing to buy emerging market, small-cap and less-liquid stocks for Sanlam Global Financial, which means it can be more volatile than its average peer. The fund’s maximum loss is 40.47 per cent but it has made 144.42 per cent over 10 years.
SKAGEN KonTiki has made an impressive 259.32 per cent over the past years, which came with a maximum loss of 35.87 per cent. This is explained by its unusual approach: unlike most global funds it has at least half of its portfolio in companies listed in emerging markets, which give the potential for much higher returns but also make it more likely to be hit with greater losses.
Peter Saacke’s Artemis Global Growth fund is another with a very strong track record. It’s made 165.04 per cent over the past decade and is currently first quartile over one, three and five-year periods; its 10-year maximum loss was 34.92 per cent.