However, in spite of its vast size, it has very few funds that are highly rated across FE’s fund and manager ratings systems.
Only one scores maximum marks across FE Crown Fund Ratings, which highlight excellent funds; the FE Alpha Manager rating, which highlights excellent managers; and finally the FE AFI portfolios, which reflect the views and opinions of leading industry experts.
For anyone looking to prop up their global exposure, here are three top-rated portfolios that could be worth a look.
M&G Global Basics
- FE Crowns: 5
- FE Alpha Manager: Yes
- AFI portfolios: Cautious, Balanced, Aggressive
However, the AFI team believe every portfolio should have exposure to this sector in some shape or form, and say that French’s fund is one of the best options in this regard. As a result, it is in all three of the advisers’ portfolios.
French (pictured) believes that the development of emerging economies and the relentless increase in the human population will ensure steady demand for raw materials, as well as the means to turn them in to finished products. He invests predominantly in companies that serve the basic materials industry. Top-10 positions include fragrance and flavours manufacturer Symrise and agricultural salt and chemical company K&S Corporation.
The performance of stocks such as these is linked to the performance of commodities, which is why the fund tends to struggle when prices fall.
In recent years, the mixed performance of China has adversely impacted the sector, which is reflected in M&G Global Basics’ bottom-quartile performance over three and five years.
Performance of fund vs sector over 10yrs
| Name | 1yr (%) | 3yr (%) | 5yr (%) | 10yr (%) |
|---|---|---|---|---|
| M&G - Global Basics | 9.18 | 12.29 | 21.22 | 324.11 |
| IMA Global | 17.81 | 20.27 | 29.41 | 132.5 |
Source: FE Analytics
However, French’s longer-term record is still strong, thanks to the fund’s stellar record in the booming years of 2003 to 2007.
The fund tends to be significantly more volatile than its peer group as a result of its high commodities exposure.
Over 10 years, it has an annualised volatility of 18.71 per cent, compared with 14.14 per cent from the IMA Global sector average.
The FE Research team says it is only appropriate for investors with a long time horizon and a stomach for volatility, and that it should always be part of a diversified portfolio.
"The fund’s strategy means it is heavily influenced by commodity prices as well as by the performance of emerging regions and the whims of equity markets in general," the team said.
"These are typically unstable areas to invest in and so the fund will continue to experience large price fluctuations."
"However, over the long-term the fund should outperform most of its competitors and hold on to most of its gains when markets fall."
French is invested almost exclusively in developed markets, but the focus of the fund means that it is heavily exposed to emerging markets, albeit indirectly.
M&G Global Basics is available for a minimum investment of £500 and has an ongoing charges fee (OCF) of 1.63 per cent.
French has run it since 1995, making him one of the UK’s longest-serving managers.
Rathbone Global Opportunities
- FE Crowns: 4
- FE Alpha Manager: Yes
- AFI portfolios: Cautious, Balanced, Aggressive
This is a more diversified portfolio than French’s, investing across a number of different sectors.
The majority of the FE Alpha Manager’s £222m fund is allocated to developed markets, with the biggest bulk of assets in North America.
The manager targets growth companies that he believes are either undiscovered or undervalued by the market.
He is free to invest in any business around the world, which he and his team identify through attending 200 meetings with company managers each year and by interacting with a shortlist of external analysts and brokers.
His bottom-up analysis has been very successful, leading the fund to exceptionally consistent returns.
According to FE data, it has outperformed its IMA Global sector average and FTSE World benchmark in eight of the last 10 years. This has translated to strong cumulative performance over the period.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The only major blemish on Thomson’s record came in 2008, when he fell significantly further than the index and sector.
According to the FE Research team, this bad experience has had a positive impact on the fund overall.
"Thomson’s approach was too aggressive before 2008 and the fund performed poorly in that year," the team said.
"The manager appears to have learnt from his mistakes, however, and is now quick to identify and drop a position to avoid further losses when it isn’t working."
"He also keeps clear of areas where he has been unsuccessful in the past and sticks to where he has proved he can make money."
Rathbone Global Opportunities requires a minimum investment of £1,000 and is available for an OCF of 1.57 per cent.
It is in all three AFI portfolios.
The fund has quite a high cash weighting, at 14 per cent, as a result of the manager's relatively cautious stance. This figure has come down quite significantly recently, however.
Thomson has been lead manager since 2005, but has been involved in the running of the fund for more than a decade.
M&G Global Dividend
- FE Crowns: 4
- FE Alpha Manager: Yes
- AFI portfolios: Cautious, Balanced, Aggressive
Many investors wrongly believe that M&G Global Dividend sits in the IMA Global Equity Income sector, since it specifically invests for income.
However, manager Stuart Rhodes does not want to be constricted by that sector’s mandate, which requires funds to target a yield in excess of 110 per cent of that of the MSCI World index.
The manager believes that dividend growth is more important than headline yield and does not want his ability to generate capital growth to be impacted by any constraints.
This way of running the portfolio has been very effective. It is a top-quartile performer in its IMA Global sector over one and three years and since its launch in July 2008.
M&G Global Dividend would also be a top-quartile performer if it was in IMA Global Equity Income.
Performance of fund vs sectors and index since launch
Source: FE Analytics
The fund has also been slightly more volatile than the sector and index in recent years, though.
It is currently yielding 3.03 per cent, which puts it ahead of many of its rivals in IMA Global Equity Income anyway.
The members of the FE Research team are big fans of the fund, but point out that it is likely to lag many of its peers in IMA Global during rising markets.
They said: "It has a bias towards large companies which are more resilient during crashes, while its regular income stream will mean it beats other global funds that target capital growth alone."
"In rising markets it may lag the benchmark a little because it holds fewer companies in economically sensitive sectors."
Consumer products is currently Rhodes’ biggest sector weighting. He has little direct exposure to emerging markets.
M&G Global Dividend is available for a minimum investment of £500 and has an OCF of 1.66 per cent.
Its stellar performance has led to huge inflows in recent years, sending assets under management (AUM) to £5.6bn.
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