Baillie Gifford Long Term Global Growth, Rathbone Global Opportunities and Orbis Global Equity are among the IA Global funds that have consistently sat in their sector’s upper deciles over recent years, research by FE Trustnet shows.
The IA Global sector is one of the largest in the Investment Association universe but its members’ focus on a large number of stocks and the heavy weighting of the US stock market in the index means that active managers can find it a challenging area in which to outperform.
According to FE Analytics, the average member of the peer group is lagging the MSCI World by 33.64 percentage points over the past decade after failing to keep pace with the index’s 128.86 per cent total return.
Performance of sector vs index over 10yrs
Source: FE Analytics
This stands true over shorter time frames as well. Over three years the sector has made 34.22 per cent while the MSCI World has made 47.26 per cent; over five years the average global fund is up 79.23 per cent but the index has risen 103.65 per cent.
Of course, those are average figures and some individual funds have managed to beat the market over recent years. Our data shows that one-third of the sector’s members are ahead the MSCI World over 10 years, 22 per cent are beating it over five years and 27 per cent are outperforming over 12 months.
What’s more, 21 funds are ahead of the index over all three time frames. Many of these have specialist mandates – such as Schroder Global Healthcare and Fidelity Global Consumer Industries – and have benefitted from the strong run in their particular area of focus.
The following table shows all 21 funds that have beaten the MSCI World index over all three time frames. As you can see, the fund making the highest return over the past decade has done so without a specialist focus or small-cap approach.
Source: FE Analytics
However, the above is just a snapshot in time – showing the performance of funds up to the end of October. Within those longer time frames, there may well have been shorter periods when funds were making more lacklustre returns.
We therefore looked at the average decile rankings of the sector over rolling three-year periods to see which IA Global portfolios had consistently outperformed their average peer. Furthermore, we only looked at funds that were launched before 1 January 2008, meaning that some popular top performers – such as Fundsmith Equity – were not found in the results.
The fund that topped the results was Baillie Gifford Global Discovery. This £235.2m fund, which is headed up by FE Alpha Manager Douglas Brodie, has an average three-year decile ranking of 1.4; since Brodie took over in May 2011 it has made a top-decile 107.39 per cent total return.
It’s important to note that the fund has a small-cap approach, which explains why it has made such high returns. Indeed, the global funds with the four highest average decile scores look at this part of the market as it is joined by McInroy & Wood Smaller Companies, Invesco Perpetual Global Smaller Companies and Schroder ISF Global Smaller Companies at the top of the table.
Source: FE Analytics
But a number of the above funds are also found on the previous table showing the funds ahead over three, five and 10 years with the highest ranking being Baillie Gifford Long Term Global Growth, Rathbone Global Opportunities and Orbis Global Equity.
The £348.4m Baillie Gifford Long Term Global Growth fund has been managed by Mark Urquhart since its launch in September 2005. Over that time, it has made a 252.78 per cent total return, making it the sector’s third best performer and outpacing the 160.31 per cent gain of the MSCI World index.
As its name suggests, the fund focuses on long-term investments and one theme Urquhart has tilted the portfolio towards is “disruptive change” in sectors such as biotechnology and areas linked to the rise of the internet.
However, Baillie Gifford Long Term Global Growth is not available on most platforms.
One of the consistent outperformers that is more widely available is FE Alpha Manager James Thomson’s £874.1m Rathbone Global Opportunities fund, which has an average three-year decile ranking of 2.8.
Thomson aims to find companies that can grow their earnings faster than their rivals, which often leads him to more economically sensitive stocks and mid-caps. While these parts of the market have the potential to fall harder than more defensive areas, the manager developed a ‘weather-proofing’ element to his strategy after heavy losses in the financial crisis, which has helped to protect the portfolio since.
Performance of funds vs sector and index over 10yrs
Source: FE Analytics
The strategy behind Orbis Global Equity has been running since January 1990 although the Oeic was only launched at the start of 2014. Nonetheless, we have data on the strategy going back to 2000 and since then its average three-year decile ranking has been 2.95.
Orbis Global Equity aims for higher long-term returns than the global stock market without taking on a greater risk of loss. The team behind the fund has a contrarian approach that revolves around bottom-up analysis, especially of long-term fundamentals rather than short-term price movements.