Only four IA Global funds are able to boast of top-quartile performance for the past five years of growth outperformance as well the market rotation towards value of 2021, Trustnet research shows.
Over the last decade, growth stocks have benefitted from record low interest rates and relatively timid economic growth. This continued into 2020 as central banks slashed rates to the floor and economic growth went negative due to the coronavirus pandemic.
However, as the coronavirus vaccine continues to roll out across the globe, investors have started to price in the impact of a surge in economic growth once economies re-open. This has sparked a major stock market rotation out of previously winning growth stocks and into value stocks which appear cheap and are more cyclically exposed to the economy re-opening.
As a result, after years of outperformance by growth-orientated equity strategies, global funds with a value-tilt have been beating their peers over the last few months amidst the ‘re-opening’ market rotation.
Against this backdrop, there are just four funds in the IA Global sector with top-ranked performance from 2015 to 2020 that managed to maintain their top-quartile rank in 2021-to-date.
Source: FE Analytics
The first fund is the $726m GAM Star Disruptive Growth fund, managed by FE fundinfo Alpha Manager Mark Hawtin.
This fund focuses on active stock selection, with a focus on growth companies with disruptive, competitive new models across sectors.
The manager tries to find the most promising companies in each sector, combining in-depth fundamental analysis to determine what to buy, and technical analysis to determine when to buy.
Interestingly, according to data from FE Analytics, GAM Star Disruptive Growth doubled its cash position from 11.35 per cent at the end of January, to 20.47 per cent by the end of February this year.
It runs a portfolio of between 40 and 60 companies, with its largest three current positions in US tech giants Facebook, Alphabet and Microsoft.
Performance of the fund over the last five years
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Source: FE Analytics
GAM Star Disruptive Growth has an ongoing charges figure (OCF) of 1.07 per cent.
The second outperformer is the $653m Guinness Global Innovators fund, managed by Ian Mortimer and Matthew Page.
This fund focuses on investing in companies benefiting from innovations in technology, communication, globalisation or management strategy.
The managers use a “strict value discipline to avoid over-hyped companies” and run a concentrated portfolio of 30 companies, all of which are equally weighted to reduce stock-specific risk.
Over the last few months, the fund benefited strongly from its positions in semiconductor stocks such as Applied Materials, KLA-Tencor and LAM Research amidst a backdrop of bullish management commentary, industry supply constraints, and continued growth in capital expenditure from leading foundries.
Whilst Applied Materials and KLA-Tencor make up 3.8 and 3.7 per cent of the fund respectively, due to its equal weighting approach many of its other holdings each make up roughly 3.4 per cent of the fund.
Performance of the fund over the last five years
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Source: FE Analytics
Guinness Global Innovators has an ongoing charges figure of 0.89 per cent.
The third is the £1.7bn JOHCM Global Select fund, managed by Christopher Lees and Nudgem Richyal.
It follows a growth at a reasonable price (GARP) investment philosophy, aiming for consistency of returns.
The managers aim to combine growth and value disciplines to “avoid the volatility that can occur in a single-style strategy, therefore to obtain better risk-adjusted returns over the medium and long term”.
The managers said: “Many seem to be stuck on the ‘growth’ versus ‘value’ debate, when the truth is somewhere in the middle.
“This is why we combine growth, value and momentum. Value investing only works if one avoids value traps (e.g. 2020), and growth investing only works if one avoids growth traps (e.g. 2021 so far).”
Its largest three positions are in Microsoft, Applied Materials and MKS Instruments.
Performance of the fund over the last five years
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Source: FE Analytics
JOHCM Global Select has an ongoing charges figure of 0.78 per cent and a 15 per cent performance fee.
The fourth fund is the $57m LF Majedie Global Equity fund run by Adrian Brass, Tom Morris and Tom Record.
The fund focuses on investing in change over the long-run and taking a truly benchmark agnostic approach to investing.
The three co-managers all have different natural hunting grounds for stocks – a deliberate decision made to enable different types of stocks in the portfolio.
It has positions in stocks such as Danish freight and shipping firm Maersk, which at some point in March was trading at half of its book value, as well as stocks such as Mercadolibre, the fast-growing Latin American ecommerce group.
Its largest three current positions are in Softbank, Facebook and Amazon.
Performance of the fund over the last five years
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Source: FE Analytics
LF Majedie Global Equity has an ongoing charges figure of 0.65 per cent.
Whilst these four funds – which all have an FE fundinfo Crown Rating of four – have done well to maintain their leading position in the sector, quite a few other top-performing funds have experienced relatively weak year-to-date performance.
Almost half (34) out of the 76 funds in the IA Global sector that had top-ranked performance from 2015 to 2020 have fallen to the bottom of the sector year-to-date.
The £24bn Fundsmith Equity fund - the sector’s biggest strategy with one of the best long-term track records - has also fallen down the rankings with a third quartile performance year-to-date.
Elsewhere, the £2.1bn Baillie Gifford Global Discovery fund - one of the 2015-2020 period’s top performing strategies - has fallen to fourth quartile performance year-to-date.