Fidelity Global Dividend, Artemis Global Income and Lindsell Train Global Equity are among some of the global equity funds the investment professionals believe are good all-round portfolio additions.
While most believe regional weightings are indeed relevant, Tilney Group’s Jason Hollands argued that an increasing move towards globalisation has meant revenue exposure should now take precedence.
“Perhaps in time firms will be able provide more granularity on where a portfolio’s underlying earnings exposure is, so a more meaningful picture of how sensitive a portfolio is to a particular economy or region can be gleaned,” he said.
In the below article, we ask the investment professionals which global equity funds they are backing and which fundamentals helped them to make this decision.
Artemis Global Income
Ben Yearsley, director of Shore Financial Planning, says Jacob de Tusch-Lec’s £3.6bn Artemis Global Income fund is a particularly attractive option for investors.
“Investors should focus on philosophy, process and quality of management. They should also ensure they don’t hold three or four funds doing the same thing,” he said.
“I like Artemis Global Income because I like to use equity income as a core of an investor's portfolio, and the manager runs it in a way that doesn't just tie it into typical value or income stocks.”
De Tusch-Lec aims to provide rising income and capital growth through an unconstrained portfolio of stocks, which often differs from that of its peers given his blend of reliable quality stocks and special situation plays with cyclical characteristics.
While it aims to outperform its MSCI AC World index on a total return basis, it also aims to generate a minimum of 5 per cent dividend growth per annum.
Its regional weightings look vastly different from its benchmark, given it has a 43.5 per cent exposure to continental European equities and 32 per cent weighting to North American holdings. The manager adopts a blended approach of top-down and bottom-up analysis when it comes to stock selection.
Since its launch in 2010, the fund has outperformed its sector average and benchmark by 69.16 and 47.01 percentage points respectively with a total return of 165.66 per cent.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
Had an investor placed £10,000 into the fund at launch, they would have received £3,773.77 in income alone.
Artemis Global Income has a clean ongoing charges figure (OCF) of 0.81 per cent and yields 3.01 per cent.
Fidelity Global Dividend
Adrian Lowcock, investment director at Architas, has chosen the four crown-rated Fidelity Global Dividend fund for its clear investment process and the fund management house’s resources to do a global mandate justice.
Manager Daniel Roberts aims to achieve income and long-term capital growth through simple companies with good cash flow generation. He looks to grow income ahead of inflation and 25 per cent greater than the MSCI All Country World index.
“Roberts believes value is the most important determinant of future returns and focuses on long term returns through the appreciation of longer term earnings performance across the business cycle,” Lowcock said.
“He looks for businesses which are understandable, transparent, not complex with predictable return distributions and a proven ability to allocate capital.
“The fund is a fairly concentrated global equities fund with about 50 holdings and is focused on large companies. The dividend element means the fund is looking for companies which pay an income, typically these types of companies are managed with a focus on shareholder returns.”
Since its launch in January 2012, Fidelity Global Dividend has returned 111.69 per cent compared to its sector average’s return of 74.45 per cent and its benchmark’s return of 93.78 per cent.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
Had an investor placed £10,000 into the fund at launch, they would have received £2,145.87 in income alone.
Fidelity Global Dividend has a clean OCF of 0.98 per cent and yields 2.85 per cent.
Lindsell Train Global Equity
Jason Hollands, managing director of Tilney Group, warns that many traditional equity funds that allocate based on geographic exposure tend to weight more than half of the portfolio to the US.
“To avoid ending up with very high dollar sensitivity, I favour funds that are unconstrained by such thinking and where managers have greater flexibility to pick stocks from across the globe on their merits,” he said.
“One of the funds I like which pursues such an approach is Lindsell Train Global Equity, which has a fantastic long-term track record.”
Headed up by Michael Lindsell, Nick Train and James Bullock, the five crown-rated fund adopts Lindsell Train’s tried-and-tested bottom-up stock selection process, which focuses on high-quality, reliable companies with strong balance sheets and recognisable branding. Its largest individual holdings, for instance, include the likes of Unilever, Diageo and Heineken Holdings. This has led to a distinctive regional bias towards developed marketed over emerging markets.
Since its 2011 launch, the £2.2bn fund has returned 164.87 per cent compared to its average peer’s return of 76.06 per cent. Given is quality bias, it has done so with a top-decile maximum drawdown (which measures the most money lost if bought and sold at the worst possible times) of 5.83 per cent, compared to its sector average’s maximum drawdown of 14.85 per cent. It also boasts a top-decile annualised volatility, Sharpe ratio (which measures risk-adjusted returns) and downside risk (which predicts susceptibility to lose money during falling markets) over the same time frame.
Performance of fund vs sector since launch
Source: FE Analytics
Lindsell Train Global Equity has a clean OCF of 0.77 per cent.
Fundsmith Equity
Martin Bamford, managing director of Informed Choice, says investors should focus on consistency, risk-adjusted returns and cost when selecting any fund.
“For a global equity fund in particular, it’s important to understand the concentration of the portfolio and the portfolio turnover rate, which both give an indication of how active the fund manager is being,” he said.
“A fund to consider in this sector is Fundsmith Equity. Managed by Terry Smith, the fund has delivered first-quartile performances over the past three and five years.
“It’s a concentrated portfolio of fewer than 30 stocks, aiming to deliver long-term growth from value investments. The ongoing charges are 0.97 per cent, which makes it a little pricey, but investors are getting truly active management from an experienced fund manager who has strong conviction.”
As with Lindsell Train Global Equity, the fund has a focus on high-quality companies that Smith deem to be attractively-valued given their free cashflow yields and long-term growth prospects. They also have to exhibit difficult-to-replicate properties such as strong brand names, patents or strong distribution networks. Again, as with the Lindsell Train fund, it has a regional bias towards developed markets which has stemmed from the manager’s bottom-up selection process.
Since its launch in 2010, the £10.3bn fund has returned 216.11 per cent compared to its sector average and benchmark’s respective returns of 134.32 and 99.96 per cent.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
It has done so with a top-decile maximum drawdown, downside risk, Sharpe ratio and annualised volatility.