Choosing country-specific exposure has always been challenging, but this has been exacerbated more recently by events in the US, ongoing uncertainty surrounding the impact of Brexit and growing tensions in Asia over North Korea.
As such, broad global equities strategies have been extremely popular in recent years with investors putting more emphasis on a manager’s ability to diversify.
In 2016, while equities, as an asset class, saw £8.2bn in net retail outflows, global equities witnessed net inflows of £2.6bn, according to the Investment Association. All major regional equity asset classes saw net redemptions during the year.
Having previously explored European fund flows as well as those in the UK All Companies and UK Equity Income sectors, below FE Trustnet looks at five funds in the IA Global sector among the most bought in the 12 months to 30 June.
In the upcoming final episode of this series we will also explore the popular IA Targeted Absolute Return sector.
The most bought fund in the sector during the past year was the hugely popular Fundsmith Equity fund run by FE Alpha Manager Terry Smith.
The five FE Crown-rated fund is a concentrated portfolio of 29 holdings that likes to hold quality businesses for the long-term.
Analysts at FE Invest noted: “The areas the fund has invested in have been in high demand since the crisis, which is why the fund has returned so much in absolute terms.”
Indeed, since its launch in 2010 the fund has returned 243.49 per cent, 117.37 and 151.12 percentage points ahead of its MSCI World benchmark and the IA Global sector respectively.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
The fund underperformed the benchmark for the first calendar year since its inception in 2016, trailing the index by just 8 basis points, but has been ahead of the sector average return in each year.
“In relative terms it has done a good job of generating higher returns and has proven to be a superior solution to funds with a similar investment philosophy,” the FE Invest team highlighted.
“[However], we believe investors must be aware of Terry Smith’s specific investment philosophy before investing in the fund as this is not a typical global equity fund,” they added.
In the year to 30 June 2017 the fund saw net inflows of some £2.3bn. With performance uplift added to the fund as well it grew its assets under management (AUM) from £7bn to £11.3bn in the 12-month period.
The fund has a yield of 0.74 per cent and a clean ongoing charges figure (OCF) of 1.05 per cent.
First State Global Listed Infrastructure
Another popular fund over the last 12 months has been the five crown-rated First State Global Listed Infrastructure fund run by FE Alpha Managers Peter Meany and Andrew Greenup.
A major theme in the past few years has been talk of central banks around the world unwinding their monetary policies in favour of more fiscal policies.
As such infrastructure spending is expected to rise, particularly in the US where president Donald Trump has been vocal about bringing new projects on-stream.
It should be of little surprise then to see the First State Global Listed Infrastructure fund near the top of the standings when it comes to new money received during the past 12 months.
The fund has been a top performer over five years, returning 109.78per cent, ahead of both the sector and benchmark, as the below shows.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
It has received £659m in net inflows over the last year helping to take its total AUM to £2.5bn from £1.5bn, once performance has also been factored in
FE Invest analysts noted: “Infrastructure assets attract income investors searching for alternatives to that offered by bond markets.
“First State’s well-respected team of analysts has excellent knowledge of this market, which makes the group ideally positioned to take advantage of any opportunities that present themselves.
“Its approach of ranking companies based on both quantitative and qualitative analysis should also stand it in good stead. Infrastructure is not a typical equity sector and investors should take its unique features into account before adding the fund to their portfolio.”
Indeed, one area that investors may need to keep an eye on is the rhetoric from central banks about increasing interest rates, which may eat into the relative income returns of such funds.
First State Global Listed Infrastructure currently yields 2.64 per cent and has an OCF of 0.82 per cent.
Vanguard FTSE Developed World ex UK Equity Index and L&G International Index Trust
Another key theme in recent years has been the rise in popularity of passive investing, with both the Vanguard FTSE Developed World ex UK Equity Index and L&G International Index Trust among the most bought funds in the IA Global sector over the last year.
Global active funds have struggled to outperform passive vehicles since the financial crisis as many have not had a large enough position in the thriving US market for fears over high valuations and the dominance of the FANG (Facebook, Amazon, Netflix & Google) stocks.
As such, the Vanguard fund, which tracks the FTSE Developed World ex UK index, has been a top quartile performer in the sector over five years.
The three crown-rated passive vehicle saw net inflows over the year to the end of June 2017 of £559m. With performance added as well, the fund has grown its AUM from £2.3bn to £3.4bn.
The fund, which has ongoing charges of 0.15 per cent has a tracking error of 0.06 over five years. (According to FE Analytics, a tracking error of below 2 generally indicates that the fund is passive.)
The L&G fund tracks the FTSE World ex UK index, meaning it includes exposure to the emerging markets in addition to developed markets.
It has beaten the sector average over the last one, three and five years and over the period experienced inflows of £513m.
As such, with performance uplift of £222m, the fund saw its total AUM rise from £823m to £1.5bn over the 12 month period. The fund has an OCF of 0.13 per cent and a tracking error figure of 2.22 over five years.
Another fund that has been successful in attracting new money is the five crown-rated Old Mutual Global Equity run by Amadeo Alentorn, Ian Heslop and Mike Servent.
The fund has been a top quartile performer over the last one, three, five and 10 years, returning 183.34 per cent over the last decade.
Performance of fund vs sector and benchmark over 10yrs
Source: FE Analytics
The fund is the only member of the 271-strong IA Global sector that has beaten the MSCI World index in each of the past five full-calendar years and has outperformed the index in each of the past seven full-calendar years.
It is diversified across quality, growth, value and momentum stocks and the managers see style-biased investing as the “Achilles heel of active investing”. (LINK)
The fund saw net inflows of £179m in the year to June 2017 which, with a £118m performance boost, took its total AUM to £659m from £362m.
The fund has a yield of 0.55 per cent and an OCF of 1 per cent.