Investors overlook top-performing Global funds
Lesser-known funds lead the sector but the majority of cash is concentrated in just a few middle-of-the-road giants.
By Mark Smith, Reporter, FE Trustnet
Friday May 11, 2012
The most successful funds in the popular Global
sector over the last three and five years are being overlooked by UK investors, according to the latest FE Trustnet
Funds focused on high growth global themes in niche areas such as technology and consumer franchises have been the best performers over the medium term.
Meanwhile, enduring favourites such as the £5.9bn M&G Global Basics, £1.5bn Fidelity Global Special Situations
and £1.2bn Neptune Global Equity
funds have had a difficult five years.
Top-performing Global funds over 5-yrs
Source: FE Analytics
The £240m Henderson Global Innovation fund has the most consistent record of outperformance over the study period.
Data from FE Analytics
shows it tops the performance table over five years, with returns of 49.42 per cent, compared with 2.08 per cent from the average IMA Global portfolio. The fund is second overall over three years.
Fund managers Ian Warmerdam and Stuart O’Gorman invest in companies that they believe are undervalued by the market and offer sustainably high levels of growth. Technology giant Apple and travel and hotel booking website Priceline.com feature in the fund's top-10 holdings.
"We continue to believe the fund’s exposure to multiple secular growth niches will continue to drive outperformance in future," said the managers in a recent note to investors.
"The current niches the fund is focused on are e-commerce, online advertising, connectivity, data growth, paperless payment, environment, and health care efficiency."
Top-performing Global funds over 3-yrs
Source: FE Analytics
The Morgan Stanley Global Brands fund is another consistent performer. It is top-decile over three years and second overall over five years, with returns of 46.87 per cent.
Assets under management have more than doubled in size over the last two years but with £378.6m it is still much smaller than the more heavily marketed giants in its sector.
As its name suggests the fund invests in internationally recognised brands and lists Nestle, British American Tobacco and Microsoft in its top-10 holdings.
All these companies have a high level of market penetration with high barriers to entry and strong pricing power.
They also have strong predictable earnings, which naturally leads to stability. Over the last three years, the annual volatility score of the Morgan Stanley Global Brands fund is 11.38 per cent. The average for the sector is 14.39 per cent.
The fund also has five crowns from FE.
The Investec Global Franchise fund invests with a similar strategy and has been equally rewarded with top-decile performance over three and five years.
Hargreaves Lansdown’s Rob Morgan thinks that the success of these specialist funds relative to their larger mass market rivals in the Global sector is predominantly down to their remit.
"The sector is a bit of a mixed bag," he said. "There are the large cap orientated growth funds which tend to be run by the larger houses and therefore have more money in them."
"These tend to be similar to the MSCI World index and have a bias towards the US. The US has not been a particularly great place to be over the last three-to-five years so that explains their underperformance."
"Around these funds you also have the smaller ones based on unusual themes and they bear no resemblance to the generalists in the sector."
"There are also smaller companies funds, environmental funds and resources funds so it’s difficult to compare like-for-like," he added.