Old Mutual Global Equity, Investec Global Special Situations and Schroder Recovery are among some of the global equity funds to have most consistently outperformed the MSCI World index over the last year, research from FE Trustnet shows.
This comes as the second part of a series, which focuses on the funds across different market areas which have best navigated the abrupt style rotations seen over the last 12 months (our previous article looked at UK growth funds relative to the FTSE All Share index).
Last year’s mass eviction of quality growth stocks from portfolios in favour of value – and the swift re-rotation at the beginning of this year sparked by the dampening of the so-called ‘Trump trade’ – wasn’t limited to UK equities.
Data from FE Analytics shows that, during the last six months of 2016, the FTSE World Value index outperformed its growth counterpart by 9.16 percentage points with a total return of 28.55 per cent, despite the indices performing roughly in line with each other during the first half of the year.
Performance of indices in H2 2016
Source: FE Analytics
In contrast, the FTSE World Growth index has almost quadrupled the performance of the value index year-to-date with a total return of 10.66 per cent.
This understandably created a difficult environment for active investors, with just 88 out of 241 funds in the IA Global sector managing to beat the MSCI World (which is one of the most widely-used benchmarks in the market area) over the last 12 months.
As such, FE Trustnet decided to hone in on the funds in the sector which have managed to beat the index during the most months over the last year using their ‘relative return’ ratios.
Only one fund managed to outperform the MSCI World during 10 of the last 12 months: Sanlam Global Financial. The fund invests specifically in financial companies and therefore has a very different benchmark.
After this, a further nine actively-managed funds managed to outperform the index during nine of the last 12 months. The fund with the greatest monthly relative return at 6.57 per cent during October was Natixis Harris Associates Global Concentrated Equity. While the £92m fund is available on most retail investment platforms, it is unavailable on most adviser platforms.
It is managed using a team-based approach and has a highly-concentrated portfolio of 20 stocks. These are chosen adopting a bottom-up, deep value approach, with its largest individual constituents including the likes of Glencore, Credit Suisse and Lloyds Banking Group.
Despite being domiciled in the UK, the fund uses US dollars as its base currency. Since its launch in 2014, it has returned 63.61 per cent compared to its average peer and benchmark’s respective returns of 42.53 and 52.71 per cent.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
There were also a few household names among the funds to have beaten the MSCI World during nine of the last 12 months.
The largest of these was the five crown-rated Old Mutual Global Equity fund, which is £683m in size and has been headed up by Mike Servent, Ian Heslop and Amadeo Alentorn since 2004.
Over the last 12 months, its largest monthly relative return was in November at 2.27 per cent while its greatest relative loss was in June at 50 basis points.
The fund aims to provide capital appreciation through a highly-diversified portfolio of 488 holdings which are selected using five initial quant screens: dynamic valuation, sustainable growth, analyst sentiment, company management and market dynamics.
From here, the managers select the best individual assets from each category that they deem to offer the best opportunities.
Over five years, the fund has returned 151.48 per cent compared to its average peer and benchmark’s returns of 79.62 and 97.53 per cent respectively.
Another well-known name making the list – despite its small AUM of £108m – was Schroder Global Recovery, which is headed up by Andrew Lyddon and FE Alpha Manager duo Kevin Murphy and Nick Kirrage.
Over the last year, its largest monthly relative return was in October at 2.53 per cent while its biggest monthly relative loss was in February at 3.46 per cent.
The managers, who launched the fund in October 2015, are well known for their deep value, bottom-up approach to stock selection. As such, the fund looks vastly different from the index. For instance, it has a significant regional underweight to the US and a large overweight to continental Europe and, in terms of sector, it has a marked overweight to financials.
Since launch, the fund has outperformed its average peer and benchmark by 6.45 and 2.38 percentage points respectively with a total return of 40.7 per cent.
Another global fund with a value approach that beat the MSCI World index during nine of the last 12 months was Investec Global Special Situations, which has four FE Crowns and has been managed by Alessandro Dicorrado and Steve Woolley since 2016.
The £43m fund aims to provide long-term capital growth through a concentrated portfolio of 40 stocks. Its largest individual constituents are Bank of America, Microsoft and Welbilt.
Over the last five years, it has returned 112.93 per cent compared to its average peer and benchmark’s respective returns of 79.62 and 91.67 per cent. Over the last year, its largest monthly relative return was in November at 4.71 per cent while its greatest relative loss was in September at 2.9 per cent.
Adopting an entirely different investment process, Guinness Global Innovators also managed to outperform the MSCI World during nine of the last 12 months.
Over the past year, its greatest relative return was in March at 2.02 per cent while its greatest relative underperformance was in during December last year at 72 basis points. It is also one of a small handful of funds in the sector to have escaped the bottom quartile for its monthly relative returns altogether over the last year.
Headed up by Ian Mortimer and Matthew Page since its launch in 2014, the £83m Sicav has a highly-concentrated and equally-weighted portfolio of 30 stocks, which are chosen based on their ability to benefit from technological or communicative innovation.
Examples of some of its holdings include US aircraft manufacturing company Boeing, PayPal and Chinese electronic component manufacturer AAC technologies.
Since its launch, the fund has outperformed its average peer and benchmark by 12.12 and 6.58 percentage points respectively with a total return of 52.41 per cent.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
Other funds to have made the grade which can fairly be compared to the MSCI World index are Morgan Stanley Global Opportunity and, with eight out of 12 relative outperformances of the MSCI World, Baillie Gifford Global Select, Henderson Global Growth and Invesco Perpetual Global Equity.