Like all equity funds, those that sit in the IMA Global and Global Equity Income sectors are considered long-term investments. However, with cash yielding next to nothing and many experts predicting the bursting of the bond bubble, more and more investors are turning to equities for the medium- and even the short-term. With that in mind, FE Trustnet looks at global equity funds for investors who want either short-, medium- or long-term exposure to the asset class.
Three-year horizon – Newton Global Higher Income
Richard Troue (pictured), analyst at Hargreaves Lansdown, says that investors should really think twice about holding an equity fund for three years, as it represents something of a gamble.
For people who are happy to take the risk, however, he thinks Newton Global Higher Income is a suitable option.
"I would be hesitant to recommend a fund over that time as it is much better to back a manager over the long-term," Troue said.
"However, if an investor felt he had a little too much cash sitting on the side line and was concerned about low interest rates, then there are still attractive yields available from global equity income funds."
"They could go for Newton Global Higher Income. Though the fund is managed by James Harries, it is very much a team effort. They don’t tend to be too aggressive, which means they can lag the market at times."
"Also, with a fund like this on a shorter term view, if markets are struggling you are still getting a level of income," he added.
Harries has managed the £4.2bn Newton Global Higher Income fund since its launch in November 2005.
According to FE Analytics, it is a top-quartile performer in the IMA Global Equity Income sector over this time with returns of 106.43 per cent. Its benchmark, the FTSE World index, has returned 67.36 per cent.
Performance of fund vs sector and index since Nov 2005
Source: FE Analytics
However, as Troue highlighted, the fund has lagged the market over the last 12 months or so.
In terms of regional exposure, Harries favours the North American and European ex UK equity markets, which combined make up nearly 70 per cent of the portfolio.
Newton Global Higher Income has an ongoing charges figure (OCF) of 1.13 per cent and requires a minimum investment of £1,000. It is yielding 4.09 per cent.
Five-year horizon – Rathbone Global Opportunities
Troue says that although investors with a five-year view can afford to take a little more risk, they should still invest in funds that offer a degree of capital protection. For that reason he would recommend a fund like FE Alpha Manager James Thomson’s Rathbone Global Opportunities.
"Thomson tends to invest in companies that are slightly more defensive in some respects," he said.
"These are typically companies with strong growth and that have a competitive advantage in the industry they focus on. He likes to hold dominant players in the market, which helps with his downside protection as it effectively waterproofs his portfolio," he added.
Rathbone Global Opportunities is one of the best-performing Global portfolios over the short-, medium- and long-term.
Our data shows it has been the second-best performing portfolio in the IMA Global sector over 10 years, with returns of 243.41 per cent, beating the FTSE World index by more than 100 percentage points.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Rathbone Global Opportunities also boasts top-quartile returns over three and five years.
As the graph shows, Thomson’s £247m fund was particularly exposed to the financial crash. Because of that, he is not afraid to maintain a defensive portfolio. At the back end of last year he held around 20 per cent in cash; however, as he recently told FE Trustnet, he has now invested that into US equities.
The fund requires a minimum investment of £1,000 and has an OCF of 1.57 per cent.
Ten-year horizon – CF Odey Opus
Troue says someone who wants to invest for 10 years or more should hold a higher risk fund, such as FE Alpha Manager Crispin Odey’s CF Odey Opus.
"Obviously, you could hold either the Newton or Rathbones fund for 10 years, but if you want to take a little more risk – and can stomach the volatility – then I would go for Odey Opus," he said.
"Odey tends to back stocks in a high-conviction manner and because of that he can end up taking relatively large positions within his fund, which can add to its volatility. With this fund you could see 10 or 20 per cent drawdown in performance over the short-term."
"However, over the long-term I would back him to do very well," said Troue.
Crispin Odey is one of the most highly respected managers in the industry.
He launched his £391m CF Odey Opus fund in August 2001. Since then it has returned 259.53 per cent, beating the IMA Global sector and the MSCI World index by nearly 200 percentage points.
Performance of fund vs sector and index since Aug 2001
Source: FE Analytics
Although Troue says investors should be aware of possible volatility, the fund has tended to beat the sector and index over most time frames.
CF Odey Opus is geared towards institutional investors, but retail investors can access it via certain fund platforms.
