Baillie Gifford International is the only IA Global fund to beat the sector in every single one of the past 10 calendar years, according to data from FE Analytics.
Five other funds beat it in nine of the past 10 calendar years – Pictet Security, GS Global Small Cap Core Equity Portfolio, MFS Meridian Global Concentrated, Schroder Global Equity and F&C Responsible Global Equity.
Most consistent IA Global funds over 10yrs
| Name | 2017 (%) | 2016 (%) | 2015 (%) | 2014 (%) | 2013 (%) | 2012 (%) | 2011 (%) | 2010 (%) | 2009 (%) | 2008 (%) | Number of years of outperformance |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Baillie Gifford International | 22.41 | 26.58 | 7.56 | 13.05 | 26.39 | 9.98 | -7.58 | 20.43 | 31.48 | -22.22 | 10 |
| Pictet Security | 14.55 | 19.74 | 11.48 | 14.78 | 23.41 | 11.44 | -9.14 | 33.97 | 25.26 | -11.12 | 9 |
| MFS Meridian Global Concentrated | 15.15 | 27.18 | 4.07 | 13.05 | 25.16 | 17.66 | -7.06 | 13.69 | 23.26 | -16.59 | 9 |
| GS Global Small Cap Core Equity Portfolio | 12.16 | 32.93 | 7.39 | 7.68 | 36.21 | 10.7 | -5.97 | 30.89 | 23.21 | -20.7 | 9 |
| Schroder Global Equity | 15.31 | 23.6 | 8.01 | 9.09 | 25.48 | 11.4 | -12.17 | 18.56 | 28.99 | -20.72 | 9 |
| F&C Responsible Global Equity | 17.66 | 23.23 | 9.32 | 8.13 | 26.53 | 10.25 | -9.05 | 17.46 | 26.69 | -23.63 | 9 |
| IA Global | 14.02 | 23.33 | 2.77 | 7.09 | 21.65 | 9.43 | -9.27 | 15.78 | 22.95 | -24.32 | N/A |
Source: FE Analytics
A further 19 funds beat it in eight of the 10 calendar years in question.
Baillie Gifford International is headed up by Charles Plowden, Malcolm MacColl and FE Alpha Manager Spencer Adair, who focus on companies that they believe will offer above-average profit growth over a period of five years.
They draw on a combination of their own investment ideas and those of Ballie Gifford’s various investment teams to produce a portfolio of 60 to 110 stocks.
These are split into four different sections: stalwart, which contains companies that have a durable franchise, deliver robust profitability in most economic environments and have a competitive advantage such as dominant local scale, customer loyalty or strong brands; rapid, which contains early-stage businesses that are disrupting existing profit pools or creating new markets; cyclical, made up of companies that are subject to macroeconomic cycles but have significant structural growth prospects and are run by strong management teams; and latent, which features stocks that have demonstrated unspectacular recent performance but have a company-specific catalyst that will drive earnings in future.
Daniel Pereira, investment research analyst at Square Mile, said Baillie Gifford International’s managers are highly experienced with a well-defined investment philosophy and approach.
However, he said this is a long-term strategy and investors should bear in mind that often the most attractive opportunities present themselves during periods of market distress.
“This could exacerbate short-term losses and holders should not expect smooth quarter-on-quarter returns as demonstrated by the fund’s returns profile versus its MSCI AC World ex UK benchmark,” he explained.
“Furthermore, its bias towards the ‘growth’ style of investing could leave the fund lagging in ‘value’-led markets.”
Baillie Gifford International made 198.08 per cent over the decade in question, compared with 137.39 per cent from its MSCI AC World benchmark and 101.4 per cent from its sector.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The £859.6m fund has ongoing charges of 0.6 per cent.
Two of the funds that beat the sector in nine of the past 10 calendar years delivered a higher total return over this period than Baillie Gifford International – Pictet Security, with gains of 227.1 per cent, and GS Global Small Cap Core Equity Portfolio, with gains of 212.58 per cent.
Performance of funds over 10yrs
Source: FE Analytics
Pictet Security invests in firms that safeguard “the integrity, health and freedom of individuals, companies and governments”. For example, it holds companies that operate in physical security, security services and IT security.
Managers Yves Kramer and Frederic Dupraz recently said that while investor sentiment is buoyant, further interest rate hikes by the Fed – coupled with a steady draining of central bank stimulus – may weigh on financial markets later, particularly on emerging-market assets.
“Consequently, we currently believe that a portfolio that is well geographically balanced is likely to deliver stronger results,” they added.
“We favour companies that have strong structural positioning, can expand margins, increase earnings and have plenty of cash.”
Pictet Security is $3.9bn in size and has ongoing charges of 1.21 per cent.
GS Global Small Cap Core Equity Portfolio was added to the FE Invest Approved List in the September rebalancing, catching the team’s eye because of its “innovative approach” and strong performance track record.
The process behind the fund is quant-driven and uses artificial intelligence to extract information from unstructured data – such as voice, text and images – to identify high-quality, well-run companies at attractive valuations.
The $521m fund has ongoing charges of 0.85 per cent.
Next up is MFS Meridian Global Concentrated, with gains of 175.59 per cent. The fund generally invests in 50 or fewer global companies that its managers believe can deliver above-average growth and that are undervalued compared with their perceived worth.
Its managers prefer “enduring” businesses, focusing on operational risks and the long-term potential for change. They consider whether the valuation reflects the long-term growth and returns of the company, and to what extent it adequately incorporates risk.
Schroder Global Equity made 149.96 per cent over the 10-year period. Manager Alex Tedder seeks to identify companies that he believes will deliver future earnings growth above the level expected by the market, typically on a three- to five-year horizon.
This is an institutional fund, however, and requires a minimum investment of £1,000,000.
Last up with gains of 147.13 per cent is F&C Responsible Global Equity, which aims to achieve long-term capital growth.
Investment is concentrated in companies in any market whose products and operations are considered to be making a positive contribution to society and seeks to avoid companies which, on balance, are felt to be harming the world, its people, or its wildlife.
It is worth noting that the global market is notoriously difficult for active managers to outperform and that although all of the funds named here beat the MSCI World index over the past decade, they were not as successful in terms of consistent outperformance.
Pictet Security fared best, beating the index in eight of the 10 calendar years, followed by MFS Meridian Global Concentrated with seven. Baillie Gifford International, GS Global Small Cap Core Equity Portfolio and Schroder Global Equity outperformed in six calendar years, while F&C Responsible Global Equity managed the feat in five.