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The IA Global funds topping the tables on (just about) every metric

19 April 2017

In the second article of the series, FE Trustnet finds out which global funds are sitting at the very top of their sector on a wide range of return and risk metrics.

By Gary Jackson,

Editor, FE Trustnet

Fundsmith Equity remains the IA Global fund that has consistently posted the best numbers on a range of performance and risk metrics in recent years, the latest research by FE Trustnet shows, although a handful of other funds are not far behind.

Global equities are an area where active management has tended to struggle. FE Analytics shows the average IA Global fund made an 80.76 per cent total return over the five years spanning 1 January 2012 to 31 December 2016 and underperformed the MSCI AC World index by more than 15 percentage points.

Performance of sector vs index between 1 Jan 2012 and 31 Dec 2016

 

Source: FE Analytics

What’s more, some 45 per cent of the funds in the IA Global sector have failed to beat the index over this period.

In order to highlight some of the funds that are topping the peer group on a range of metrics, we have looked across the sector for those with the best average decile ranking when it comes to cumulative five-year returns, those for the three most recent individual calendar years, annualised volatility, maximum drawdown, alpha generation, Sharpe ratio, downside capture and upside capture.

Over the following pages, we take a closer look at the five IA Global fund leading the sector on the average decile ranking for these 10 metrics between 1 January 2012 and 31 December 2016 as well as revealing the top 25 in a table on the final page.


Old Mutual Global Equity

Performance of fund vs sector and index between 1 Jan 2012 and 31 Dec 2016

 

 

Source: FE Analytics

In fifth place is the £612.8m Old Mutual Global Equity fund, which is managed by Ian Heslop, Mike Servent and Amadeo Alentorn and has an average decile ranking of 2.2. The four FE Crown-rated fund’s 162.29 per cent total return is the IA Global sector’s highest for the period looked at in this research and it is also top decile when it comes to alpha generation, Sharpe ratio and upside capture. It has been more volatile than its average peer and the index but has tended to post lower losses than both. The fund is managed using a quantitative process that looks for stocks with above-average growth and below-average valuations. It also holds a wide spread of stocks (currently it owns 493) with Apple, Bank of America, Facebook, UnitedHealth Group and Wal-Mart Stores being its largest positions. Old Mutual Global Equity has a clean ongoing charges figure (OCF) of 1 per cent.


Schroder ISF Global Smaller Companies

Performance of fund vs sector and index between 1 Jan 2012 and 31 Dec 2016

 

 

Source: FE Analytics

Matthew Dobbs and Richard Sennitt's $260.5m Schroder ISF Global Smaller Companies fund has achieved a 2.1 average decile ranking during the five years examined in this research. It is the only one of the top five not to sit in the top decile for five-year returns; its 122.33 per cent gain puts it in the second decile. The three crown-rated fund is in the sector’s first quartile for alpha generation, Sharpe ratio and downside capture, however.  The managers prefer companies that have strong earnings and cash flow growth prospects but are still trading at a reasonable price. The portfolio is overweight Asia and, to a lesser extent, Europe, while it is also overweight the industrials and consumer discretionary sectors. Schroder ISF Global Smaller Companies has a 1.34 per cent OCF but it also charges a performance fee of 15 per cent on outperformance of the S&P Developed Small Cap, subject to a high-water mark.


Ardevora Global Equity

Performance of fund vs sector and index between 1 Jan 2012 and 31 Dec 2016

 

 

Source: FE Analytics

The £815.3m Ardevora Global Equity fund has been run by Jeremy Lang, William Pattisson (who are both FE Alpha Managers) and Ben Fitchew since its launch in February 2011. It has posted an average decile ranking of 2 in this study thanks to first-decile numbers for five-year returns, alpha generation, maximum drawdown, Sharpe ratio and downside capture. The process behind the five FE Crown-rated fund revolves around the managers recognising where the market can be wrong. To this end, the watch three types of market participant - investors, ­financial analysts and company managers – to find signs of behaviours such as excessive anxiety, over-exuberance, overconfi­dence or excessive risk taking. The managers place little stock in meeting management and prefer to judge companies on observable facts gleaned from stock prices, valuations, forecasts and company accounts. Ardevora Global Equity has a 1.59 per cent OCF.


GS Global CORE Equity Portfolio

Performance of fund vs sector and index between 1 Jan 2012 and 31 Dec 2016

 

 

Source: FE Analytics

The $2.7bn GS Global CORE Equity Portfolio was in eighth place in last year’s research but has moved up into second place this year after achieving an average decile ranking of 1.6. The five FE Crown-rated fund is in the IA Global sector’s top decile for five-year total returns, alpha generation, maximum drawdown, Sharpe ratio and downside capture. The fund aims to offer core global equity exposure and has the mandate of delivering pure growth, with no need to generate income. It also attempts to build a portfolio that has the same style, sector, risk and capitalisation characteristics as its MSCI World benchmark; outperformance is aimed for through underlying stock and country selection. The fund is currently overweight North America, Europe ex UK and Japan with its top holdings being Merck, Enel and Amgen. GS Global CORE Equity Portfolio has an OCF of 0.70 per cent.


Fundsmith Equity

Performance of fund vs sector and index between 1 Jan 2012 and 31 Dec 2016

 

 

Source: FE Analytics

Holding onto the top spot for a second year is the five FE Crown-rated Fundsmith Equity fund, which has achieved an average decile ranking of 1.5 in this study. Headed up by FE Alpha Manager Terry Smith since launch in November 2010, the £10.3bn fund is built around a concentrated portfolio of business in industries serving repeatable needs such as consumer staples, manufacturers and medical device producers. It also avoiding economically sensitive areas such as banks, commodities and airlines. Among its top 10 holdings at the moment are stocks like Philip Morris, Pepsico and Microsoft. Over the five years looking at in this research, Fundsmith Equity made a 157.86 per cent total return – the second highest in the peer group – and sits in the top decile for alpha generation, maximum drawdown, Sharpe ratio, upside capture and downside capture. The fund has a 1.06 per cent OCF.


 

Source: FE Analytics

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.