This has been helped by the greater options available to investors, many of which now have a long and established track record.
These days, a select few global growth and global equity income funds are among the best sellers, including multi-billion pound portfolios such as M&G Global Dividend and Newton Global Higher Income.
M&G and Newton & BNY Mellon are the only two new groups to be recognised in the latest rebalancing of the FE Group Ratings, but there are, however, some lesser-known emerging options worth keeping an eye on that score highly across all of FE’s other ratings.
Here are three examples.
Rathbone Global Opportunities
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FE Crowns: 4
- FE Alpha Manager: Yes
- FE AFI: Cautious, Balanced, Aggressive
Performance of fund, sector and index since July 2005
Source: FE Analytics
Our data shows that the fund has returned an impressive 129.91 per cent since Thomson took over as lead manager in July 2005. This puts it comfortably ahead of its IMA Global sector average and FTSE World index benchmark, which have returned 68.49 and 87.79 per cent respectively, though the fund has been slightly more volatile over the period.
Most investors in equity funds have a medium- to long-track record, but it is interesting to note that the fund has been very consistent since Thomson took over, beating its sector and peers in seven of the last eight calendar years. The manager is also ahead so far in 2013.
Year-on-year performance of fund, sector and index
| Name | 2012 returns (%) |
2011 returns (%) | 2010 returns (%) | 2009 returns (%) | 2008 returns (%) | 2007 returns (%) | 2006 returns (%) | 2005 returns (%) |
|---|---|---|---|---|---|---|---|---|
| Rathbone Global Opportunities | 9.52 | -4.67 | 26.59 | 37.97 | -39.39 | 30.44 | 9.99 | 35.24 |
| FTSE World Index | 11.83 | -5.79 | 16.28 | 19.64 | -18.18 | 9.45 | 6.54 | 24.49 |
| IMA Global | 9.43 | -9.27 | 15.78 | 22.95 | -24.32 | 8.78 | 7.79 | 24.76 |
Source: FE Analytics
The manager has captured this performance with a strict bottom-up stockpicking approach. He tends to hold somewhere between 40 and 50 stocks, making the fund relatively high-conviction compared with its peers. This goes some way to explaining why it has been more volatile as well.
The fund’s strong run has earned Thomson FE Alpha Manager status and his fund four FE Crowns. Rathbone Global Opps is also highly regarded by the FE AFI panel of influential industry experts, appearing in all three of their recommended portfolios.
The fund is highly rated by Rob Gleeson’s FE Research team, which includes it in the FE Select 100. The team refers to Thomson’s record as "outstanding" and notes the manager learned from the mistakes he made in 2008.
"During the financial crisis, the fund was too dependent on broader economic conditions and it experienced heavy losses," the team said. "As a consequence of this, Thomson decided to adopt a more conservative approach, investing 20 per cent of his portfolio in stocks that are less economically sensitive."
"Since then the fund has been more balanced, which helped drive its solid performance during the turmoil of 2011."
"The manager appears to have learnt from his mistakes and is now quick to identify and drop a position to avoid further losses when it isn’t working."
The team adds that Thomson avoids emerging markets, preferring stocks from more developed countries. He also actively uses cash to dampen volatility when he believes stock prices are too high; at present, the fund’s cash weighting is at around 5 per cent.
The manager’s biggest regional weighting is to North America, at 58 per cent of AUM. Europe is second with 18 per cent, followed by the UK with 16 per cent. He currently has exposure to Japan.
Thomson invests predominantly in large caps but is prepared to venture down the market cap spectrum when he sees specific opportunities. FTSE 250 company Rightmove is currently his largest holding, while ASOS – a FTSE AIM constituent – is also in his top-10.
Rathbone Global Opps requires a minimum investment of £1,000 and has ongoing charges of 1.57 per cent.
First State Global Listed Infrastructure
- FE Crowns: 5
- FE Alpha Manager: No
- FE AFI: Cautious, Balanced, Aggressive
Infrastructure funds offer both growth and income to investors and are looked upon as a key diversifier for yield. They tend to have a relatively low correlation to equities and bonds and are a good hedge against inflation, which are important attributes for anyone aiming to build a diversified portfolio.
First State Global Listed Infrastructure is the standout performer in this area. Our data shows that it has significantly outperformed its IMA Global sector since launch in October 2007 and is also ahead over three and five years. The fund has also been significantly less volatile over all of these periods, protecting particularly effectively against the downside in 2008 and 2011.
Performance of fund vs sector since launch
Source: FE Analytics
The fund takes the UBS Global Infrastructure and Utilities 50/50 index as its benchmark, but this has a record only going back to late 2011.
The fund has a competitive yield of 3.22 per cent, which it distributes twice a year.
The managers tend to get this yield from companies in developed countries: the US, Europe, the UK and Australasia make up the bulk of assets. Utilities, ports, airports, railways and toll roads are among the fund’s major hunting grounds. Top-10 holdings include National Grid, Transurban Group and East Japan Railway.
The fund’s very strong risk/adjusted return has earned the maximum number of FE Crowns and it is also very popular with the FE AFI panel. Neither Meany nor Greenup are FE Alpha Managers, however.
"In the current environment, the infrastructure sector can both protect investors’ capital and act as a buffer against inflation – First State’s well-respected team of analysts have excellent knowledge of the market, which makes the group ideally positioned to take advantage of opportunities," said the FE Research team, which includes First State Global Listed Infrastructure in the FE Select 100.
The team adds that the listed infrastructure market is currently benefiting from long-term drivers and has a positive outlook, which should mean that the fund continues to outperform its sector when markets fall. However, when stock markets rally – as they did earlier this year – the fund is likely to underperform.
First State Global Listed Infrastructure has ongoing charges of 1.62 per cent and requires a minimum investment of £1,000.
Invesco Perpetual Global Equity Income
- FE Crowns: 5
- FE Alpha Manager: No
- FE AFI: Balanced
Mustoe does not yet have a long enough track record of running funds to achieve FE Alpha Manager status, but the fund has been one of the standout performers in the IMA Global Equity Income sector since its launch in March 2009, earning it five FE Crowns.
Our data shows Invesco Perpetual Global Equity Income has returned 110.34 per cent over the period, compared with 96.47 per cent from the sector average – which is also the fund’s benchmark.
Performance of fund vs sector since launch
Source: FE Analytics
The fund has done this with less volatility and has a better record in falling markets as well. It also has a superior risk/return profile over one and three years, and since Mustoe (pictured) took over as lead manager in December 2012.
Mustoe is in charge of the regional allocation of the fund, but draws on the expertise of Invesco’s stable of highly rated equity managers when picking stocks.
FE Alpha Manager Mark Barnett is responsible for the UK portion of the portfolio, while Stephanie Butcher picks all European stocks. The expertise of Tony Roberts from Invesco’s Japan team, Tim Dickson from the Asia team and Simon Clinch, who runs Invesco’s US funds, are also drawn upon.
Mustoe says the fund’s priority is not to find companies with high starting yields, but those that have a “quality and rising” dividend policy. The prospective yield for the fund is currently 3.4 per cent, which is a touch above average for the sector.
The fund tends to have between 50 and 60 stocks and is regionally very diversified. Mustoe concentrates almost exclusively on developed markets and actively shifts his regional allocation to where he sees the most value. He is currently overweight Europe and Japan for this reason.
The £445m Invesco Perpetual Global Equity Income fund requires a minimum investment of £500 and has ongoing charges of 1.68 per cent. It is included in the FE AFI Balanced portfolio.
