Global funds are a common method of diversifying portfolios away from the UK equities that often make up the bulk of holdings. The sector is the second largest in the IMA universe, with assets under management of £74.1bn.
Looking across the 267-strong IMA Global sector shows just four funds have combined first-decile returns over 2014 so far as well as being first decile when comes to volatility, meaning they are among the least volatile of their peers.
Three are also top decile for maximum drawdown, which shows how much an investor would have lost if they bought and sold units at the worst possible times, while the other is in the second decile.
First State Global Listed Infrastructure, managed by Peter Meany and Andrew Greenup, is the fund that comes highest here when it comes to total return, making 12.98 per cent over the year to date. This makes it the six highest returning fund in the sector but it is below the rise in its benchmark.
Over 2014 the five FE Crown-rated fund has experienced volatility of 9.80 per cent, the sixteenth best of the peer group, while its maximum drawdown has been just 5.62 per cent. This fits in with the managers’ aim of preserving capital in order to achieve long-term growth.
Performance of fund since launch vs sector and index
Source: FE Analytics
The FE Research team has placed First State Global Listed Infrastructure on its Select 100 list of preferred funds while it holds an ‘AA’ rating in Square Mile Investment Consulting & Research’s Academy of Funds.
Square Mile’s analysts said: “This is an interesting fund for a number of reasons. It offers access to a different asset class and can meet the needs of a range of investors. Its objectives are clearly articulated and to date have been achieved. It is managed by an experienced, focussed and driven investment team, still in the early stages of building its franchise.”
First State Global Listed Infrastructure has a clean ongoing charges figure (OCF) of 0.83 per cent and currently yields 2.53 per cent.
Another infrastructure fund features in the top decile for performance and volatility - Brad Frishberg and Jonathon Ong’s CF Macquarie Global Infrastructure Securities fund.
The fund has returned 11.35 per cent since the start of the year with volatility of 9.91 per cent. Its maximum drawdown over this time was 6.31 per cent, placing it in the sector’s second decile.
It has outperformed the average fund in the IMA Global sector over the eight years of the last market cycle, as the graph below shows, but has not made a strong a return as First State Global Listed Infrastructure.
Performance of fund vs sector and index over 8yrs
Source: FE Analytics
The fund is currently positioned with a defensive bias, with the managers arguing this is warranted given the amount of monetary stimulus in the global economy. They added: “We maintain a cautious stance in Europe and a positive view on the pipeline sector where there continue to be low risk, value-enhancing investment opportunities that should drive further earnings and dividend growth.”
CF Macquarie Global Infrastructure Securities has a 0.98 per cent clean OCF and yields 1.51 per cent.
Gabrielle Boyle’s Trojan Capital also features on the list. Like the larger Trojan and Trojan Income funds, the portfolio is managed to protect investor capital on the downside and has held up well during the difficult conditions of 2014.
It’s up 11.11 per cent over the year to date with volatility of 9.59 per cent and a 4.64 per cent maximum drawdown, which is the fourth lowest in the IMA Global sector over this time.
Like the other funds from Troy Asset Management, the portfolio underperformed into 2012 and 2013 when markets were rising strongly but comes into its own in down or sideways markets. In 2011, for example, it made 5.65 per cent when the average fund in its sector lost 9.27 per cent.
Performance of fund vs sector and index over 8yrs
Source: FE Analytics
Trojan Capital has ongoing charges of 1.12 per cent.
Newton Global Opportunities, headed by FE Alpha Manager Robert Hay, is the final fund on the list. It’s returned 8.66 per cent over 2014 so far, with 9.93 per cent volatility and a 6.06 per cent maximum drawdown.
The portfolio is relatively concentrated with Hay focusing on larger companies such as Citigroup, Microsoft , British American Tobacco and Walgreen.
It’s comfortably outperformed the average global fund over the past eight years although it has lagged its FTSE All World benchmark over this time.
Performance of fund vs sector and index over 8yrs
Source: FE Analytics
The fund appear on the FE Research Select 100, where it is highlighted for the consistency of its performance and for the more cautious stance it adopted after the collapse of Lehman Brothers.
The FE Research team said: “The fund’s defensive stance is reflected in its allocation to cash and sometimes derivatives, which were brought in to hedge against certain market risks. This has proved beneficial to a certain point but could hamper the future performance if markets keep rising.”
Newton Global Opportunities has a clean OCF of 0.81 per cent.
Of course, little under a year is a very short time frame on which to judge funds. With this in mind a future series from FE Trustnet will look at the funds that have achieved similarly strong return and volatility profiles over the longer term.
