GAM Global Diversified, Trojan Global Equity and Schroder MM International are among the global equity funds that have consistently been less volatile than the market, research by FE Trustnet shows.
While investors might not always prioritise avoiding volatility and at times might actually seek it out, some could prefer to opt for funds that have a strong track record in avoiding the worst turbulence of the market.
Therefore, we examined 66 quarterly one-year periods starting 1 January 2000 to 31 December through to 1 April 2016 to 31 March 2017 in order see how often IA Global funds have posted lower volatility numbers than the MSCI AC World index.
When we look at the performance of the average member of the IA Global sector, FE Analytics shows it has been less volatile than the index slightly more than half of the time.
Annualised volatility of the IA Global sector vs MSCI AC World
Source: FE Analytics
The average member of the peer group has been less volatile than the MSCI AC World in 34 of the 66 12-month periods examined, or 52 per cent of the time. This is a better track record than the IA UK All Companies sector, where the average fund was less volatile than the FSTE All Share only 41 per cent of the time.
But after looking at individual members of the IA Global sector (after stripping out those that do not have at least 40 periods of track record), we found that only 19 of the 127 funds examined posted lower volatility numbers than the index in half or more of the 66 periods.
All 19 funds can be seen below, but it’s important to remember that this has not always translated into higher returns than the index.
Source: FE Analytics
The fund at the top of the table is an example of this.
The £100.6m Scottish Widows Opportunities Portfolio fund has underperformed the MSCI AC World index by almost 65 percentage points since launch in January 2002 after returning 126.40 per cent. This puts in the bottom decile of the peer group.
The one FE Crown-rated fund, which has a multimanager approach, has also lagged the index over one-, three-, five- and 10-year periods up to the end of 2017’s first quarter.
However, the table does contain funds that have managed to outperform the index when it comes to total return as well as annualised volatility.
The funds that focus on specific sectors in the global equity market – L&G Global Health & Pharmaceuticals Index, Schroder Global Healthcare, Morgan Stanley Global Brands, Fidelity Global Consumer Industries and Fidelity Global Health Care – have generated higher returns than the index over three, five and 10 years.
All five of the above funds are also in the sector’s top quartile over the three-, five- and 10-year periods up to the end of March 2017.
When it comes to non-specialist funds, Schroder MM International has outperformed while being less volatile than the index. The £496.7m fund, which is managed by Marcus Brookes, Robin McDonald and Joe Le Jehan, returned 216.20 per cent between launch in May 2002 and the end of 2017’s opening quarter and beat the index by around 20 percentage points.
Performance of fund vs sector and index between launch and end of Q1 2017
Source: FE Analytics
It’s also ahead of the index and the average IA Global fund over five and 10 years.
Schroder MM International is a fund of funds, with top holdings including GAM Global Diversified, Findlay Park American, GLG Japan Core Alpha, Invesco European Equity and JO Hambro Global Opportunities.
The managers behind the portfolio are known for taking a broadly cautious stance over recent years, arguing that low interest rates and quantitative easing have pushed up the price of many assets into expensive territory. The portfolio currently has 9.1 per cent in cash but, as the list of holdings suggests, does have exposure to more value parts of the market such as European and Japanese equities.
MFS Meridian Global Equity and CF Canlife Global Equity are also ahead of the index over the five and 10 years to the end of 2017’s first quarter, while Trojan Global Equity is close behind over both timeframes.