This suits many first time investors who are typically looking for a portfolio that gives a diverse spread across the markets and gives plenty of downside protection.
With that in mind, FE Trustnet asks three industry experts their favourite funds for a novice investor from either the IMA Global or the IMA Global Equity Income sector.
Newton Global Higher Income
Whitechurch’s Ben Willis (pictured) says one of the best available global funds for a first time investor is Newton Global Higher Income.
“It is a fund we have been buying for some time now,” Willis said. | Name | Newton Global Higher Income |
| Fund size | £3.6bn |
| Min. investment | £1,000 |
| OCF | 1.62% |
| Yield | 3.98% |
| Manager | James Harries |
| FE Crown Rating | 5 Crowns |
“Due to the fund’s income mandate it trends towards to large caps which have a history of paying dividends, some may say they are boring but they are safer companies. The global remit gives the fund a spread across the developed markets as well as Asia Pacific.”
“Investors are normally looking for around 7 per cent per annum returns. With this fund you are already banking the fund’s yield – around 4 per cent – from day one so any capital growth on top of that from its core holdings is even better.”
The five crown-rated Newton Global Higher Income fund has been managed by James Harries since its launch in November 2005.
According to FE Analytics, since then the fund has returned 98.85 per cent while its benchmark – the FTSE World – and the IMA Global Equity Income sector have returned 63.93 per cent and 60.93 per cent, respectively.
Performance of fund versus sector and index since November 2005
Source: FE Analytics
The fund has tended to be less volatile than its peer group over that time and has also notched up top quartile performances over three and five years.
Newton Global Higher Income has a yield of 3.98 per cent.
The highest weighting in the £3.2bn portfolio is to North American equities at 39.47 per cent, while 30.26 per cent is invested in continental Europe.
Fundsmith Equity
Willis says that Fundsmith Equity is a fund in the sector that is becoming increasingly popular.
| Name | Fundsmith Equity |
| Fund size | £1.2bn |
| Min. investment | £1,000 |
| TER | 1.69% |
| Yield | N/A |
| Manager | Terry Smith |
| FE Crown Rating | N/A |
“Terry Smith, who manages the fund, follows a strategy of only looking at companies that make cash, which I know sounds flippant,” he said.
“However he invests in businesses that are cash generative which have massive operations and massive presence in their markets.”
“Those type of companies might throw off a dividend, but the manager is looking for growth not necessarily income.”
Though Fundsmith Equity was only launched in November 2010, the fund has £1.2bn worth of assets under management.
Its returns of 24.90 per cent make it the seventh best performing fund in the IMA Global sector – which comprises 243 portfolios – over one year. Its MSCI World benchmark has returned 16.79 per cent over that time.
Performance of fund versus sector and index over 1yr
Source: FE Analytics
The fund holds 62 per cent of its assets in the US, 24 per cent in the UK and 14 per cent in Europe. The fund counts multinational corporates such as Imperial Tobacco Group, Microsoft and Unilever in its top 10 holdings.
M&G Global Dividend
Darius McDermott (pictured), managing director at Chelsea Financial, says there two funds on his buy list that fit the bill – one of which is FE Alpha Manager Stuart Rhodes’ M&G Global Dividend.
“Though M&G Global Dividend is in the IMA Global sector, it concentrates on income. The fund invests in companies that have consistently raised their dividends year-on-year. It tends to focus on large cap companies,” he said. “Stuart Rhodes has a strong four and a half year track record and he will invest in global emerging markets where he sees fit.”
Rhodes has managed the fund since its launch in July 2008.
| Name | M&G Global Dividend |
| Fund size | £5.2bn |
| Min. investment | £500 |
| OCF | 1.66% |
| Yield | 2.95% |
| Manager | FE Alpha Manager Stuart Rhodes |
| FE Crown Rating | 4 Crowns |
The fund has returned 86.40 per cent over that period while its MSCI AC World benchmark has returned 51.56 per cent and the IMA Global sector has returned 41 per cent.
Performance of fund versus sector and index since July 2008
Source: FE Analytics
M&G Global Dividend has been a top quartile performer over one, three and five years and is yielding 2.95 per cent.
Rathbone Global Opportunities
McDermott is also a fan of Rathbone Global Opportunities, which is headed up by FE Alpha Manager James Thomson.
“Rathbone Global Opportunities has been on our buy list for the last 20 months,” he said.
| Name | Rathbone Global Opportunities |
| Fund size | £222m |
| Min. investment | £1,000 |
| OCF | 1.57% |
| Yield | N/A |
| Manager | FE Alpha Manager James Thomson |
| FE Crown Rating | 4 Crowns |
“It has a mid to small cap bias and only invest in developed markets; if Thomson wants access to developed markets he will do so via companies listed in developed markets. The fund used to be an out and out growth portfolio, but had a very bad 2008.”
“Since then, the manager now has a defensive growth bucket which includes companies such as Rightmove, which should do well in down markets.”
The £222m Rathbone Global Opportunities has been top-quartile in the IMA Global sector over three years with returns of 35.11 per cent, beating the FTSE World Index by nearly 10 percentage points.
Performance of fund versus sector and index over 3yrs
Source: FE Analytics
As McDermott says, the fund had a particularly poor 2008, when it lost 39.39 per cent. Since then Thomson has maintained a high cash weighting, but he told FE Trustnet recently that he has cut it to 12 per cent in the last three months.
Invesco Perpetual Global Equity Income
Philippa Gee Wealth Management’s Philippa Gee (pictured) says it is best to get a diverse spread in the global sector and is a fan of the five crown rated Invesco Perpetual Equity Income.
“For a first time investor who wants global exposure, I would go towards the equity income route and even then if they have very little to invest I would split it between a couple of funds,” she said.
“One of the funds I would go for is Invesco Perpetual Global Equity Income. Even though there has been a management change we are still sticking with it. The fund’s new manager – Nick Mustoe – has a very good pedigree.”
| Name | Invesco Perpetual Global Equity Income |
| Fund size | £367m |
| Min. investment | £500 |
| OCF | 1.69% |
| Yield | 2.65% |
| Manager | Nick Mustoe |
| FE Crown Rating | 5 Crowns |
Mustoe took charge of the £367m Invesco Global Equity Income fund following the departure of Paul Boyne and Nick McGraw in November last year.
Since the fund’s launch in March 2009 the fund has returned 104.69 per cent while the IMA Global Equity Income sector has returned 94.01 per cent.
Performance of fund versus sector since March 2009
Source: FE Analytics
Invesco Perpetual Global Income has a yield of 2.95 per cent and has a 41.28 per cent weighing to North American equities.