Investors seeking global funds that have a strong track record and lower charges than their average peer could look at the likes of Rathbone Global Opportunities or Artemis Global Income among others, according to FE Analytics.
Following last week’s article on the UK funds that boast below-average ongoing charges while also achieving strong long-term performances, we have taken a look at the IA Global and IA Global Equity Income sectors to scope out which investment vehicles won’t charge you the earth for healthy returns.
Global funds are often chosen for their regional diversification benefits and the fact that managers have a wider pool of investments to choose from when positioning their portfolios. However, this broader universe of stocks means they are often more expensive than their peers elsewhere in the Investment Association sector.
While the annual management charges are broadly the same on average compared to UK funds, the ongoing charges tend to cost more (the average global growth and global equity income fund has an OCF of 1.1 per cent) owing to factor such as the sheer number of investable securities and the need for more analysts or the need to travel across the world regularly to meet company managers.
Despite the above, FE Trustnet has managed to pen together a collection of five global funds that have a below-average OCF for their sector, are highly rated and have delivered strong performances over the last five years.
Rathbone Global Opportunities – 0.79% OCF
First up is FE Alpha Manager hall-of-famer James Thomson’s Rathbone Global Opportunities fund, which is £705m in size and has four FE Crowns. 
The fund has been managed by Thomson (pictured) since 2003 and aims to provide growth through under-the-radar holdings that are chosen through a bottom-up stock selection process. The portfolio is also high conviction with just 54 holdings – these include the likes of Paddy Power Betfair, Rightmove and Pandora.
Almost the entire fund is held in developed market stocks as Thomson says he doesn’t have the specialist skillset to invest in emerging markets. As such, the fund’s largest weighting is the US at 48.25 per cent, followed by the UK at 24.66 per cent, Europe ex UK at 20.77 per cent and Asia Pacific at just 2 per cent.
The fund has delivered a consistently strong performance, having found itself in the top quartile for its total returns over one, three, five and 10 years.
Over Thomson’s tenure, it has provided a total return of 318.87 per cent, compared to its average peer’s return of 131.92 per cent and its FTSE All World benchmark’s return 179.04 per cent.
Performance of fund vs sector and benchmark
Source: FE Analytics
It also posted below-average annualised volatility and a top-decile Sharpe ratio – which measures risk-adjusted performance – over the same time frame. However, it has a higher-than-average maximum drawdown – which measures the most potential money lost of bought and sold at the worst times – of 48.58 per cent, which occurred during the financial crisis and led to Thomson “weather-proofing” his investment process.
Baillie Gifford Global Alpha Growth – 0.68% OCF
Next up is Baillie Gifford Global Alpha Growth, which is co-run by Charles Plowden, Malcolm MacColl and FE Alpha Manager Spencer Adair.
The £868m fund’s stocks are chosen with a focus on above-average sustainable earnings and cash flows and these will fall under at least one of four categories – established and durable growing firms, younger and rapidly-growing businesses, cyclical industries with good growth stories and ‘dull’ companies that have been offered fresh opportunities from economic changes.
The outcome of this is a diversified portfolio of 104 stocks that span across North America, Europe, Asia Pacific, emerging markets and the UK. Its top 10 weightings include the likes of Amazon, Prudential, Alphabet and Royal Caribbean Cruises.
“A fund such as this should do best at times when the market steadily advances and it is likely to lag when the market gets ahead of the fundamentals or if the market sells off heavily,” the Square Mile team, who awarded the fund an ‘AA’ rating, said.
“This is a long-term strategy and holders should bear in mind that often the most attractive opportunities present themselves during periods of market distress.”
The team warns that this could magnify short-term losses and that investors should not expect smooth quarterly returns. Since its launch in March 2010, the fund has an above-average annualised volatility and maximum drawdown, although it does boast a top-quartile Sharpe ratio due to the strength of its returns.
Over the same time frame, it has provided a total return of 74.8 per cent, outperforming its sector average and MSCI AC World benchmark by 18.4 and 28.26 percentage points respectively.
Henderson Global Care Growth – 0.85% OCF
As the name suggests, Henderson Global Care Growth is somewhat of a different offering, given that it will only buy into stocks that enhance the environment and life of a community – its largest holdings include Adobe, Visa, RELX and Delphi Automotive.
The stocks are selected by focusing on company specifics and through the identification of long-term trends that are likely to benefit certain areas of the market. The companies are chosen based on whether they have strong ethical practices and are then put through strategic and financial analysis before being awarded a place in the portfolio.
The four crown-rated fund currently has a concentrated portfolio of 63 holdings and the fund maintains a US bias. Its regional weightings are the US at 60 per cent, followed by Europe at 14.24 per cent, the UK at 8.8 per cent and Japan at 8.45 per cent. It also has smaller regional weightings in Asia Pacific and Asia Pacific emerging equities.
“This fund is an attractive proposition for the ethically minded investor, since each holding has undergone vigorous analysis; plus the managers also have the flexibility of using different industries and geographical regions to generate returns,” the FE Research team said.
Manager Nick Anderson took to the helm of the fund in 2012 and was joined by co-manager Hamish Chamberlayne a year later. Since then, the fund has provided a total return of 18.75 per cent compared to its sector average and benchmark’s respective returns of 11.41 and 19.74 per cent.
Performance of fund vs sector and benchmark under Anderson and Chamberlayne
Source: FE Analytics
While it has significantly outperformed its peers, it has an above-average annualised volatility and maximum drawdown as well as a below-average Sharpe ratio, which suggests the fund is not well-suited to the more cautious investor.
Artemis Global Income – 0.81% OCF
Over in the IA Global Equity Income space, Jacob de Tusch-Lec’s four crown-rated Artemis Global Income fund is one of the top-performers.
The fund aims to achieve a rising income as well as capital growth and currently yields 3.75 per cent. It has also delivered a top-decile total return over three and five years and has outperformed its sector average and benchmark under de Tusch-Lec’s tenure by 41.99 and 32.02 percentage points respectively with a total return of 106.71 per cent.
The £2.9bn fund has 181 holdings – while most of these are in developed markets, it also has small weightings in the Middle East, Africa and the Americas.
The FE Research team says the fund is suited to investors that want to achieve a growing level of income without sacrificing returns for the privilege and points out that de Tusch-Lec uses a proven approach to pick stocks based on their potential to grow dividends.
“We have been impressed not only by the manager’s capacity to read the macro environment, but also in understanding the dynamics of global equity markets,” it said.
Artemis Global Income has an above-average Sharpe ratio but a bottom-decile annualised volatility and an above-average maximum drawdown over the manager’s tenure.
Newton Global Income – 0.79%
The second global equity income fund on the list is Newton’s offering, which was launched over a decade ago by James Harries who left the firm at the end of last year to join boutique firm Troy.
The £4.7bn fund’s deputy manager Nick Clay has therefore only been in the hot seat for less than six months, but over this time frame the fund has provided a total return of 11.88 per cent compared to its sector average’s return of 6.98 per cent and its benchmark’s return of 6.82 per cent. It also has a top-quartile annualised volatility, Sharpe ratio and maximum drawdown over the same time frame.
Performance of fund vs sector and benchmark under Clay
Source: FE Analytics
The fund has retained very much the same approach that its former manager had – Clay adopts Newton’s top-down thematic approach to investing, although each holding must yield at least 25 per cent more than the FTSE World index at point of purchase.
If it dips below this figure, the stock is sold. The fund currently has a concentrated portfolio of 55 holdings across North America, Europe, the UK, the Pacific Basin and Australasia.
Newton Global Income yields 3.52 per cent.
