Legg Mason ClearBridge US Aggressive Growth, Templeton Global Bond and Schroder ISF Global Multi-Asset Income are some of the funds that are domiciled outside of the UK but are being heavily researched by UK financial advisers, FE Trustnet research shows. 
While the bulk of the funds available for sale in the UK are domiciled on home shores, these are not the only options available to investors as plenty of attractive offerings can be found in fund centres such as Luxembourg and Ireland.
Most of FE Trustnet’s coverage of the funds industry focuses on the Investment Association or Association of Investment Companies universes, as these are the most common hunting grounds for UK-based investors.
However, in this article we look at the FCA Recognised universe, where funds that are domiciled outside of the UK but approved for sale here, can be found. We used the FE Analytics Market Intel tool to discover which have been the most popular offshore funds with the financial advisers, discretionary fund managers and other investment professionals using FE Analytics.
The top 25 most researched FCA Recognised sectors
Source: FE Analytics Market Intel tool
The above chart shows the research activity within the FCA Recognised universe over the past 12 months and immediately illustrates a key difference between it and the Investment Association universe: when researching Investment Association funds, the IA UK All Companies sector is by far the most popular but when it comes to offshore funds the Equity – UK peer group is only the 22nd most researched.
This is not too surprising, given the fact that the FCA Recognised universe isn’t only catering for UK investors. There are plenty of funds covering areas outside of the UK, so professionals looking for funds are likely to be seeking something different.
The Equity – International sector is the most popular within the universe, accounting for 8.52 per cent of its research activity over the past years. It’s followed by Fixed Interest – Global (6.55 per cent), Absolute Return (5.44 per cent), Equity – Emerging Markets (5.25 per cent) and Equity – Asia Pacific ex Japan (5.10 per cent).
On an individual fund level, however, it’s a $7bn US equity fund that has been the most researched by the professional investors using FE Analytics.
Fidelity America is managed by Angel Agudo and holds five FE Crowns for superior performance in terms of stockpicking, consistency and risk control over recent years. Since Agudo took over the portfolio in June 2014 it has generated a 65.25 per cent total return in sterling, beating its average FO Equity – USA peer by about two percentage points but lagging the S&P 500 by just under 20 percentage points.
The Luxembourg-domiciled Sicav has a value approach to investing, which could explain why it has outperformed its average peer by such a slim margin over the past three or so years as the growth style has been the one that has pushed the index higher for the bulk of the post-crisis period.
Berkshire Hathaway, which is headed up by investment legend Warren Buffett, is the portfolio’s largest holding at 5.7 per cent of assets. Other major holdings include Willis Towers Watson, Bank of New York Mellon, Verizon Communications and Citigroup.
Source: FE Analytics Market Intel tool
This isn’t the only offshore fund in the Equity – USA that is popular with the professionals. The sector is the sixth most heavily researched in the FCA Recognised universe, with Franklin U.S. Opportunities and Legg Mason ClearBridge US Aggressive Growth also making an appearance in the top 25.
Templeton Global Bond is in second place. The $18.2bn fund is managed by Michael Hasenstab, who is chief investment officer at Templeton Global Macro; he is joined by Sonal Desai as co-manager. The fund has posted a 162.15 per cent total return, in sterling, over the past 10 years, putting it in the sector’s top quartile and beating the JPM GBI Global benchmark by more than 50 percentage points.
The managers make use of Templeton’s global research platform to support their work in finding long-term value in bond markets and has avoided expensive developed market government debt for a number of years. At present, more than 20 per cent of the portfolio is in Mexican bonds, with 14 per cent in each of South Korea and Brazil.
Hasenstab and Desai’s $21.2bn Templeton Global Total Return and the team-managed $1.1bn Natixis Loomis Sayles Multi Sector Income funds are also found in this popular offshore sector and have gathered a lot of professional investor attention.
Performance of funds vs sector over 5yrs
Source: FE Analytics Market Intel tool
Another area popular with those researching offshore funds is multi-asset income, as Schroder ISF Global Multi-Asset Income, BlackRock GF Global Multi-Asset Income, JPM Global Income and BNP Paribas European Multi-Asset Income can be found in the top 25.
Of these, Schroder ISF Global Multi-Asset Income is the largest with assets of just under $5bn. The fund, which is managed by Aymeric Forest, has made 53.11 per cent since launch in April 2012, beating its average Mixed Asset – Cautious peer by more than 20 percentage points.
The fund aims for an income distribution of 5 per cent per annum and capital growth over a market cycle. Forest invests in wide range of assets and markets to build a diversified portfolio and the fund currently has more than 1,500 holdings.